Mistakes to avoid when buying a franchise
Experts believe that it is often the rush associated with buying a franchise that leads to its failure. Franchisees often end up buying a franchise just on its name and not performance, at times just based on their emotions and not sound information. A franchise is a business, which needs investment of time, money and effort. Hence one should select a franchise only after doing his/her homework well.
Here a list of mistakes to avoid when buying a franchise:
• Ignorance of business strength Failure often comes from the inability of the franchisee to select a franchise which suits his strength and skills.
• Differentiation between name and performance Franchisees often buy a franchise juts based on the name of the brand. At times a brand can be effectively built by aggressive marketing and advertising but actually may be very sluggish in its sales. Hence it is very important to separate the brand name from its performance. Once you select a brand with performance the name will automatically come.
• Non-Alignment of goals A franchisees inability to align his goals with those of the franchisor can also lead to failure because franchising is a joint business where success is determined by the teamwork of both. Hence a common goal is necessary
• Lack of planning A franchisee should not buy a franchise without a ready business plan. When one plans to buy a franchise, a long term as well as a short term business plan should definitely be in place. Lack of planning is often a major reason for failure
• Failure to select the right business It is often the inability of the franchisee to select a franchise that meets his lifestyle needs, long term objectives and financial requirements that leads to failure. One should select a business that suits his lifestyle, meets his financial requirements and also something which interests him.
• Lack of Research Prospective franchisees often don’t do enough credible research on a franchise. During research one should not only investigate the future prospects of the franchise but also the prospects of the industry as a whole. Also the demand for the franchised product and its sustainability should be thoroughly investigated.
• Ignorance of one’s own finances The inability of the franchisor to judge his own finances accurately can also lead to his downfall. One should be aware as to how much finance should be needed, how it will it be raised and how will he repay it. Like a business plan even a finance plan needs to be ready in advance.
• Lack of communication with the franchisor Since franchising is like a joint business venture, an effective communication network between the franchisor and the franchisee is very important. A communication gap between them can definitely lead to a loss in business.
• Not using experts For an inexperienced franchisee it is very important o use industry help like franchise attorneys, hiring legal experts etc.