Avoiding Obstacles to Success as a Franchisee |
Posted: July 20, 2018 |
Recently, franchise industry website Bluemaumau.org published an article titled, Avoid These Obstacles to Becoming a Successful Franchisor. While most of the advice in the article is not particularly pertinent to franchisees, one quote stands out: “The key to success is being aware in advance of those yet-to-be encountered potholes and planning accordingly.” As a franchisee, failing to plan ahead is one of the greatest obstacles to long-term success. Before buying a franchise, it is critical to carefully review the Franchise Disclosure Document (FDD) and franchise agreement, and attempt to negotiate any contract provisions that create unreasonable risk. Here are three other obstacles that prospective franchisees should strive to avoid as well: 1. Putting Too Much Faith in the FranchisorWhen you buy a franchise, you want to start out on the right foot. You want to give the franchisor confidence that you have what it takes to succeed, and you want to avoid issues that could create tension between you and the franchisor’s representatives. But, too often, new franchisees put too much faith in their franchisors. What do we mean by this? Specifically:
When buying a franchise, you should perform your own due diligence, and you should attempt to negotiate the franchise agreement. Experienced franchisors will understand and appreciate that you are simply doing what is necessary to protect your investment. 2. Not Budgeting for Startup Costs and Initial OperationsBuying a franchise is an expensive proposition. Beyond the initial franchise fee, franchisees will often need to make significant investments in equipment and inventory, hire multiple employees, and enter into lease agreements for high-traffic retail locations. While franchisors must provide estimates of franchisees’ initial investments in Item 7 of the Franchise Disclosure Document (FDD), these estimates will not necessarily reflect the needs of any one particular franchisee. Additionally, it is not unusual for new franchisees to experience several months of unprofitability. Failing to budget appropriately for the initial start-up phase is one of the most-common reasons why new franchisees are unsuccessful. 3. Assuming That Buying a Franchise Guarantees SuccessFinally, no matter how well-established or how recognizable a franchise may be, succeeding as a franchisee still requires dedication and business savvy. Your franchise will not run itself, and your franchisor will not help you if you do not help yourself. While buying a franchise may allow you to hit the ground running, it is important not to let this lull you into a sense of complacency. Plan ahead, make informed decisions, stick to a schedule, and be prepared to respond accordingly when things go wrong. Speak With an Experienced Franchise Attorney for FreeWe have experience exclusively representing franchisees and dealers. If you are thinking about buying a franchise or your franchised business is struggling, you can call (202) 293-3947 or request a free consultation online to speak with an attorney in confidence.
|
|||||||||||||||||||||||||
|