Sunday, November 25, 2007


While many people who have become franchisees are more than pleased with the results, others have been disenchanted by the dynamics and realities of franchising.

Below are common mistakes made by entrepreneurs who have elected to become franchisees.

Not being suited for franchising.
Self-evaluation is one step that too many franchisees neglect to consider. Unlike opening a business of your own, buying a franchise means becoming part of a larger organization and adhering to guidelines and structure. If this is not a concept with which you are comfortable, then do not consider franchising.

Not knowing enough about the product.
What's to know? Those three very dangerous words have gotten franchisees into situations that they were not prepared for. Whether it is fast food or any other type of product, you need to know all about what you are selling and feel comfortable selling it. Due diligence is a key step before actually buying a franchise.

Not talking to other franchise owners.
Many people have opened a franchise because they knew someone who did it and made it work. You need more than that to give you an idea of what franchising is all about. You need to talk with several franchisees and get their opinions before investing heavily in a business that may not be right for you.

Underestimating the costs.
Too many franchise owners prepare only for the initial outlay of money but do not adequately plan for the ongoing financial needs. Do the math beforehand. Make sure you have a detailed budget not only of startup costs but also of operational costs for at least the first three years.

Failure to read the franchise agreement carefully.
This should be obvious, but in the excitement of the moment, many people skim over important documents. This is huge mistake. Do some research ahead of time so you know the standard elements of the Uniform Franchise Offering Circular (UFOC).

Failure to have adequate legal counsel on hand.
Franchise agreements are long and include a significant amount of detailed information. You should find an attorney who is familiar with such franchise agreements. Too often, franchisees sign documents they do not fully understand.

Not getting everything in writing.
Company sales reps tell potential franchisees all sorts of wonderful things about the workings of the company. While hyping the company is part of the job, remember to get any promises in writing.

Not assessing the competition carefully.
Many franchisees assume that the franchising company would open a location in a certain area only because they know it will be a success. This is not the case. It is up to you to evaluate your competition and plan your competitive strategy.

Underestimating the time commitment.
Just because a franchise is part of a larger company does not mean that you will have less work to do. Yes, it is advantageous to start with a recognizable name, but you still have a ton of work ahead of you to start up and run the business. Make sure you and your family are behind such a commitment.

Lack of marketing.
Franchise products do not sell themselves. Product recognition is a plus, but your customers also recognize the products of competing franchises. While the franchise company will help market the product, you need to do your share of local marketing and promotion as well.

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