Purchasing a franchise can be a speedy way for an entrepreneur to enter the business world. The main advantages are a managerial template and full support from a known brand. But it is possible for people to make judgment errors when buying a franchise, primarily out of frustration or being in a hurry.
To maximize your chances of succeeding, be careful to avoid the seven most common mistakes, listed below in no particular order:
1. Letting “Popularity” Be Your Guide
Never make a major decision based on the current, temporary popularity of a franchise opportunity. First, popularity does not equal financial success. Second, popularity is a fickle component of the big picture. What’s “in” today could be quite unpopular six months from now.
2. Ignoring the Due Diligence Process
It’s easy to skip the due diligence phase because it entails plenty of research and work. But this is where winning franchisees make or break themselves. Avoid the mistake by spending several weeks evaluating the franchise model, getting input from professionals you trust, and digging in with in-depth online research about the history of the enterprise.
3. Not Researching Legal Aspects
Unless you’re a lawyer, hire one to evaluate the legal side of a given franchise business. Know exactly what you’re getting into, not just money-wise, but obligation-wise. Only an experienced legal professional can translate the sometimes complex language of franchise contracts.
4. Ignoring the “Personal Fit” Factor
Even if everything else seems to fall into place, you must choose a franchise that suits your management style, personal preference, and interests. It’s too easy to crunch numbers and make a selection based solely on profit potential. Sidestep this common pitfall by narrowing down the list based on the kinds of companies you would enjoy operating on a day-to-day basis.
5. Not Studying the Geographic Territory
Be careful not to get involved with a business opportunity that is geographically overextended. Research the area where your franchise will be located, paying attention to population trends, demographics, economic factors, and how many similar businesses already exist there.
6. Not Taking Advantage of Support & Training
Good franchise opportunities offer plenty of training and support to new owners. Unfortunately, independent-minded folks tend to ignore suggestions and advice, even when it comes from an experienced team of professionals. Use as much information and guidance as you can get your hands on, like extended training sessions, tutorials, and in-depth webinars.
7. Overlooking the Financial Obligation Details
Make a financial spreadsheet that lists all your obligations to the franchisor, along with the timing of each payment. Note whether you must buy supplies or services from them or are free to acquire them from another source. Some agreements require large upfront payments and long-term obligations, so get all those facts before signing a contract.
Maximize Success by Avoiding the Pitfalls
Individuals who take time to make careful decisions can turn a new franchise opportunity into a financial success. The trick is to avoid common errors, don’t rush the process, and focus on long-term viability. Research is the core component of the buying process, but it’s also imperative to evaluate your personal fit for the venture and get the very best guidance you can find.
