Purchasing a franchise can be one of the best decisions you have ever made, or it can be the worst.
The entire reason Let’s Franchise exists, is to help ensure you make it one of the best and in this article not only will we share what the biggest mistake we have seen others make, but we’ll make sure you have everything you need to avoid it.
Let’s paint a scenario shall we?
There are 2 businessmen, lets call them Independent Isaac and Curious Chris.
Independent Isaac decided to start a restaurant business using his Grandma’s age-old recipes that he grew up with and always enjoyed. He is ego-driven and feels like he doesn’t need anyone’s help because nothing beats the fresh and flavorful taste of these fine home-cooked meals. He found his own restaurant to lease, set his own prices, borrowed the capital required, and opened up shop. He was able to get his restaurant up and open so quickly that he even impressed himself.
On the other hand, Curious Chris also had the intention to start a restaurant business but decided to make inquiries before starting it. He made reservations to several different restaurants at both independently-owned and franchise-operated brands. He reached out to his network and to several people on LinkedIn in his local city who are in the same industry. He asked around for other people’s suggestions. He Google’d it, went to Franchise Expo’s, and was referred to a few key people that provide Free Franchise Consulting services, one of them being Seth Lederman.
Who do you think has the highest probability of success?
Some people might say, Independent Isaac, the first businessman, was bold, confident, and goal-driven. That might be true but trying to do anything alone is one of the worst things you can do for yourself. The opportunity-cost is simply way too high. Curious Chris, the second businessman, took longer to open but made all the right moves. He inquired, gathered research, and filtered all the information to make the best decision possible.
So, What Is The Biggest Mistake a Franchise Buyer Can Make?
Simply put, it’s trying to do it alone and not reaching out to an expert that can help. Starting or investing in a business is one of the biggest decisions you will make for you and your family and trying to figure it all out independently is the biggest reason people fail at business. They think they are doing the right things, but in reality, they are making all the wrong decisions.
How can you avoid making this mistake? We recommend Seth Lederman, a seasoned business executive, entrepreneur, and investor. He is also a Certified Franchise Executive (CFE) and has helped hundreds of people, just like you, find the right franchise and business opportunities.
Click this link to Request A Free Consultation from Seth Lederman. Just let him know you were on the Let’s Franchise website and read this article, he would appreciate it.
What are some other mistakes Franchise Owners make? Let’s get into some more of them here.
According to Forbes, many franchise chains have high failure rates between 80-90%. That’s a good reason for you to take a chill pill before jumping into purchasing a franchise. There is also some good news! Some other franchise chains are well-known for their extremely outstanding success rates. So it is all dependent on your final decision concerning the franchise you plan to purchase. Before we jump into the mistakes franchise buyers make, let us quickly dive into five reasons why franchises fail. I figured that there is a need to enlighten ourselves on the reasons why most franchises fail. This aspect will help new or prospective franchisees to learn about some things that need to be avoided in order to follow the path to a successful business.
The Lack Of Required Skills
Take a look at it from this perspective: Can a skilled sales rep treat a dying patient? Yeah! I guess you didn’t see that coming. The obvious answer to that question is a big NO. Although the sales rep is well-trained and skilled as far as sales are concerned, he or she can never treat a dying patient.
This is because the skillset required to treat a dying patient doesn’t match his or her qualifications. The same applies to a franchise owner. Many people enter the business with the sole intention to do something new or have more fulfillment, but lack the skills to run the business. Running a business franchise requires key operational skills that will bring out success and not the other way round. You have to be prepared enough to handle every aspect of the business.
All franchisors take prospective franchisees through an interview process. Through this process they will learn more about you, your goals, and whether or not you meet the right qualifications. This is to ascertain whether you can run the business and lead the brand to more profit and success.
Did you know that not all franchise applicants get accepted, regardless if you meet the capital requirements or not?
For instance, Chick-fil-A, a popular restaurant brand, are widespread in many states. In fact, they are one of the most successful fast-food businesses in the United States. Many individuals apply to purchase their franchise yearly. They receive as much as 20,000 franchisee applications yearly but only accept about 80-100 people. That’s pretty low, right? That’s one of the reasons their brand is so successful. They accept people that have the right skills and qualifications to run their business. After accepting their chosen applicants, they organize several seminars and training sessions just to make sure that they are adequately equipped with the right skills to run a business properly.
Wrongfully Budgeted Working Capital
Working capital in business is one of the most essential aspects to keep a business running. Cashflow is what determines whether your business will succeed or not. After purchasing a business franchise, it is true that you saved yourself the stress of starting from scratch but that is not all. However, there are also some other expenses that also need to be considered or settled in order to complete the process. We have different types of “capital” in business apart from the starting capital. After settling all expenses in the FDD, you’ll also need what’s referred to as “working capital” which is the capital needed to run the business monthly or yearly. Not having enough capital budgeted to run the daily activities of the business can put you out of business real fast. This is another pitfall that must be avoided if you want to become successful. You have to be financially ready to operate a business before purchasing its franchise.
Being Ego-driven or Having Overconfidence
Don’t get me wrong, it is good to be confident when starting a business. Yeah, there is no arguing with that fact. It is your confidence level that would assist you in making certain decisions such as purchasing the business franchise itself. However, on the other hand, overconfidence is the bad attribute one must do without when starting a business. Overconfidence makes you neglect the place of adequate preparation. It makes you think it is easier to run the business without actually preparing for it. When I meet overconfident people, I can always tell the business would mostly result in failure. Yeah, true story!
Seth Lederman, a franchise consultant from Let’s Franchise in a recent interview said, “I would be the worst Franchisee because I’m too Entrepreneurial…” That’s the type of know-thyself confidence required to succeed in business.
Buying a Franchise With A Bad Business Model
Just like a home is first designed by an architect before the building is erected, before a business begins, a business model is designed. How would the business operate? Every business needs a plan that will lead to achievements of both the short term goals and the long term goals. A business without a good business model is definitely on a path to failure. Starting a business without a good business model is nothing but gambling. Every good business must possess a good business as it is an essential factor in becoming successful. In addition, your business model must be updated and current because most businesses go out of business because they neglected that factor when drafting their business model. This is one of the reasons why businesses like Chick-fil-A accept franchisees who are willing and available full-time to attend their businesses. They understand the fact that franchises fail when certain things are not in place.
Selecting An Unfavorable Location
This is also another important factor a franchisee must consider. It’s a common understanding that a franchisee purchase is a way to speed up revenue and profits because the business whose franchise you purchased was already established. So despite it not being a new business the location still matters. You can’t expect business sales to improve when your shopping mall or fast food joint is in a location with low traffic.
Next Steps – Request A Free Consultation
Getting help from a professional Franchise consultant is the most important first step you can take. By reading this article, you have the opportunity to get free consulting by filling in the application at https://letsfranchise.com/get-free-consulting/
