10 Common mistakes franchisees make

Entrepreneurs who plan to buy any business franchise should avoid these slip-ups By: Khris Marc Ronquillo | Dec 03, 2013 15:30 pm Not all partnerships are create equal, especially in the case o! aspirin" !ranchisees that are more ea"er than prepare #hen enterin" a !ranchise eal$ %ith 35 years e&perience in the !ranchise 'usiness, Ru ol! ($ Koti), !oun er o! RK *ranchise +onsultancy, has seen his share o! !ranchise eals "oin" 'a an companies "oin" 'an)rupt 'ecause the parties i not mana"e their e&pectations #ell or they !oun mi #ay throu"h the partnership they ,ust i n-t see eye to eye on runnin" the 'usiness$ Koti) "i.es a run o#n o! the most common mista)es small 'usiness o#ners ma)e #hen enterin" into !ranchise contract$

1.

Failing to do homework

*ranchise 'uyers shoul in.esti"ate the !ranchisor 'e!ore 'uyin" anythin"$ /ome !ranchise o!!ers are actually scams$ *in out e.erythin" you can a'out the !ranchisor an the in ustry 'e!ore "ettin" that ama0in"ly cheap !oo cart$

2.

Believing that a booming industry assures success

/ome !ranchisors use the si0e o! the in ustry they-re a part o! an their collecti.e potential mar)et as a come1on to !ranchise 'uyers$ %hile it-s "enerally important that you are a ressin" a "ro#in" mar)et, this alone #ill not "uarantee success$ 2he !ranchisor-s stan ar s in sta!! trainin", mar)etin", an site selection, amon" others, an your commitment to meetin" those prescri'e plans are more crucial to your success as a !ranchisee than ,ust the prospects o! the in ustry ser.e $

3.

Failing to read the fine print

3rior to si"nin" a !ranchise contract, the prospecti.e !ranchisee must rea it care!ully$ 4t-s stron"ly encoura"e to hire a la#yer to #al) you throu"h the contract$ 4n a ition to the a"reement, the !ranchise operations manual is another ocument that 'in s 'oth !ranchisors an !ranchisees an must 'e rea thorou"hly$

Buying a franchise when you want to do your own thing

%hen you 'uy a !ranchise, you ha.e to use the !ranchisor-s system$ 4! you insist on oin" it your #ay, you may .iolate your !ranchisin" a"reement an ris) ha.in" it terminate $ /tic) to the plan or on-t 'uy a !ranchise at all$ 4t-s not only the name o! !ranchise concept you are 'uyin" 'ut an entire 'usiness, so you ha.e to use all o! it$ 4! you ha.e mis"i.in"s a'out the !ranchise !rom the 'e"innin", sleep on it !irst or s)ip it all to"ether$

!.

"aving unrealistic e#pectations of the franchisor and its system

( lot o! !ranchise 'uyers thin) that once they 'uy a !ranchise, all they ha.e to o is collect money$ 2hat coul n-t 'e !ather !rom the truth$ 5ust li)e in any other 'usiness, the more han s1on the !ranchisee is, he smoother the operations #ill 'e an the 'etter chances o! the 'usiness succee in"$ 6ou must 'e rea y to #or) lon" hours to implement the !ranchisor-s 'usiness plan$ 2he "oo thin" a'out this 'usiness arran"ement is you ha.e the !ranchisor-s plan to "i.e you irection$ Most o! the .aria'les epen on ho# #ell you-ll implement the plan an ho# the mar)et #here you are locate respon s to your 'usiness$ 7ach company also has a culture o! its o#n$ Best to meet an tal) to the !ranchisor an some o! its !ranchisees to see ho# you- !it in$ /ome !ranchisors ha.e starte o!!erin" lo#er royalties, minimal rene#al !ees, an other incenti.es to sho# their commitment to their !ranchiseessuccess$

$.

%rying to open your franchise outlet for less

Don-t mislea your !ranchisor$ 4! you are o.erly optimistic yet un ercapitali0e , you may 'e oome to !ail111throu"h no !ault o! your !ranchisor$

&.

%hinking 'bigger is better(

4t-s not necessarily true that the more !ranchises e&ist in a chain, the more success!ul they must 'e$ 8reat mar)etin", a""ressi.e sales, an an attracti.e in ustry can ma)e a !ranchise "ro# e.en thou"h there are 'etter !ranchisors in the same in ustry$ 3rospecti.e !ranchisors shoul contact as many !ranchisees as they coul an as) them ho# much support they recei.e !rom the !ranchisors$ +hec) other systems to e.aluate the satis!action le.el o! the !ranchisees$ /ometimes, in their ea"erness to "ro#, !ranchisors o.er1saturate an area #ith too many units that en up encroachin" on each other-s mar)et shares$ 4t can sometimes 'e an a .anta"e i! the !ranchisee 'elon"s to a smaller !ranchise an ha.e the opportunity to "ro# #ith them$

).

Believing in 'never be the first franchise in a system(

%ho coul "et more care an attention than the !irst !ranchisee to ,oin the company9 4! the !ranchisor has "oo e&perience in its in ustry an you are con!i ent that they #ill 'e a'le to help you replicate their success, 'ein" the !irst !ranchisee shoul 'e an e&cellent proposition$ 2he !irst recruits o!ten "et a cheaper !ranchise !ee than succee in" !ranchisees an 'etter treatment !rom its !ranchisor, since company o#ners #ant to sho# o!! their !ranchisees to other applicants as their success story$

*.

+nvesting in a franchisor with no trademark

2he most important part o! any !ranchise a#ar e is the tra emar), uly re"istere #ith the 4ntellectual 3roperty :!!ice$ 4! the !ranchisor oes not secure a tra emar) !or the name an lo"o, #hoe.er ma)es a !irst claim to the tra emar) can 'rin" up le"al matters that coul a .ersely a!!ect the 'usiness$

10.

+nvesting in a franchise system that is not properly developed

4n or er to sa.e money, some !ranchisors o their o#n !ranchise e.elopment instea o! hirin" pro!essional consultants$ 2he pro'lem #ith an un er e.elope !ranchise system is that !ranchisees on-t o!ten "et the support they eser.e$ *ranchise 'uyers #oul 'e ma)in" a 'i" mista)e i! they #ere not concerne a'out #hether the !ranchisor they-re ealin" #ith has ha pro!essional consultations or not$