• Franchise Moves

4 common mistakes first-time franchisees make and how to avoid them

Even though the success rate for franchising is substantially higher than those of independent start-up businesses, it is still no guarantee of success. Before investing you should have fully researched your options to find the right franchise for you. However, without proper preparation there can still be a number of common mistakes you should look out for.

Here’s our list of four common mistakes first-time franchisees make and how to avoid them:

1. Not fully understanding what you’ve signed up for

The simple truth is, a franchise agreement is a very one sided document with most of the power lying with the franchisor. This is not just normal, it is actually a really positive thing for you, as it means the franchisor can take swift action if anyone in the network does something to damage the brand - the brand that you have invested in. The agreement will detail what is expected of you and the consequences of non-performance or compliance – you absolutely need to know where you stand and be OK with it. Unlike a job where you can simply resign and work your notice if you don’t like something, a franchise agreement will tie you into a contract for at least five years that you can’t simply walk away from without penalty.

-> Solution: Go to the British Franchise Association website and choose a lawyer or firm from their list of members and get them to check your agreement and explain it to you. This ensures you will be dealing with a solicitor with proven experience in their field with regard to franchising. This is not the time to try and save money by a) not getting it checked or b) getting a lawyer without franchise experience and knowledge to check and explain it.

2. Incorrectly estimating the financial costs

Some franchisees will underestimate the true overhead costs of running a new business, and/or overestimated the incoming revenue for the first few months – both of which can result in them quickly running out of money.

-> Solution: Write a business plan built upon what your franchisor has told you (regarding ALL costs and likely revenue), what other franchisees have told you (whom you will have spoken to during your due diligence) and ideally have it assessed by your bank – something you will 100% have to do anyway if you are going to a bank for funding. Be realistic – err on the side of caution in terms of how much you think you will make, and do the opposite in terms of how much money you think you will need to build your business in the early days. You don’t want to go back to the bank cap-in-hand after six months looking for more money.

3. Not taking advantage of the unique benefits you get as a franchisee

Undoubtedly one of the biggest benefits of joining a franchise brand is having access to a franchise support system. Many franchisors will ensure that their network of franchisees can offer each support, advice and share best practice with initiatives such as regional and national franchise forums, awards evenings and franchisee councils.

-> Solution: Don’t be scared to ask for help! Not only can existing franchisees provide a much-needed morale boost during the difficult start-up phase, they can also help you to avoid the mistakes that they made. Alongside your franchisor support system, take advantage of all the help available – remember with franchising, you are in business for yourself, but not by yourself.

4. Not following the system

After spending so long conducting research, going through the recruitment stages and completing all the initial training, you will of course be excited to finally start operating your own franchise and turn it into a huge success. You will no doubt be full of energy and ideas and eager to start matching the performance of more established, experienced franchisees in the network, however, remember you have invested in a proven system – follow it!

-> Solution: Focus on delivering the very best to your customers, follow the system and remember your training – do this and the rewards will come. As with any business there are still risks to franchising. However, with proper planning you can ensure that you avoid a lot of the mistakes many franchisees can make when starting out. If you are looking for your perfect franchise opportunity, get in touch with us today to arrange an informal chat.


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