5 Traps to avoid when going into franchising
Some people end buying a franchise believing that just owning a franchise is an automatic way to success. Like any other business even a franchisee needs to be run. People believe that once they buy a franchise, success is inevitable. This is not true, a franchise certainly increases ones chances of success but it does not guarantee success. Like in life, there is no free lunch, you have to work hard for everything you want.
Here we list common traps to avoid while buying a franchise:
• Franchisors Brochure Very often franchisors try to entice an aspiring franchisee by mentioning the growth prospects and future potential of the franchise. It is very important to not fall for ‘"Future potential’’ as defined by the franchisor. You should inquire with industry experts and also try and gather information from various other sources on un-biased future potential of that particular franchise. One should also try to find out the growth in the last few years.
• Franchisor support Some people believe that they don’t need to put in any hard-work for their franchisee because the franchisor is there to provide all the training. This is not true, the franchisee needs to put in a lot of hard-work, and he will only be supported by the franchisor and not spoon-fed by him. Also one should make sure in the beginning as to which areas the franchisor is going to support the franchisee and for how long this support will continue. Franchisors support doesn’t guarantee success but your team-work does.
• Business plan Although the franchisor has a long term business plan for his franchise it is very important to assess this plan and also check whether he has the resources to execute this plan. Also an existing business model doesn’t guarantee success for the franchisee. A franchisee should also have his business plan which is in-sync with the franchisors business plan. The franchisees business plan will determine the success of his own franchisee.
• Contract Terms It is very important to not let the franchisor dictate his terms and conditions. The contract should only be signed when both parties are satisfied and agree with all the terms and conditions. Don’t ignore this as just another legal formality because this will form the basis of your relationship. An ignored condition can spell doom for your business in the future E.g. A clause for termination, which you weren’t aware of
• Exclusivity Even if the franchisor is ready to grant you exclusivity, it doesn’t mean your business will definitely succeed. It is very important to have the exclusive rights over just an adequate area because a very big area or a very small one will become a hindrance in the development of your franchise. Hence, having exclusive rights in itself isn’t great but having it for the right area, definitely is.