Avoid Making These 5 Mistakes as a First-Time Franchisee

Avoid mistakes as a franchisee

Running a franchise can be flexible, exciting and profitable. It can also be challenging, particularly for first-time franchisees. Here are the five mistakes you should avoid making at all costs when you’re starting a franchise for the first time.

Mistakes happen. They’re a natural part of the learning process, and you shouldn’t pretend otherwise. But while some mistakes are small, harmless and easy to come back from, others might create a recipe for franchise failure. Protect yourself and your franchise by avoiding these kinds of errors.

Learning the ropes as a first-time franchisee

Compared to starting your own business and going it alone, franchising is low-risk. You’re trained, supported and guided every step of the way. But even still, when you’re learning the ropes, it’s natural that you’ll slip a few times. It’s human that you won’t do everything perfectly as a first-time franchisee.

Fewer than 1% of franchise units closed citing commercial failure in 2018 [British Franchise Association], and it’s pretty unlikely that nobody in the other 99% made a single mistake or error of judgement as they ran their franchise. With a lot on your plate, things are bound to slip through the cracks. Just be sure that cracks don’t become chasms, letting larger mistakes through.

When it comes to franchising, the good news is that if done strategically, keeping in mind a few rules, it works well. To attain a realistic franchise launch goal, there is a step-by-step process to follow and some mistakes to avoid.
– Baishali Mukherjee, Entrepreneur

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5 franchising mistakes to avoid making as a new franchisee

1. Failing to review the franchise agreement before signing

When you become a franchisee with a business, you and your franchisor will sign a legally binding document known as a franchise agreement. If you don’t review this agreement and get clear on your legal obligations before signing, you could be making a huge mistake. Before getting on board, seek advice from a solicitor with expertise in the franchising world, and have them review the agreement and break it down for you - the document can be lengthy and complicated, and you don’t want to miss anything.

If you don’t understand your obligations as a first-time franchisee, you could breach your agreement, harm your franchise and feel generally unhappy with the situation. Examples of the kind of breaches that you could commit, potentially without even knowing it, include:

Non-payment of fees
Failure to provide accounting information
Misuse of the business’s brand name or trademarks
Failure to meet agreed targets
Any action that brings the franchise brand into disrepute
Failure to adhere to the operations manual

2. Failing to speak with loved ones

Investing in a franchise comes with many benefits, but there’s no denying that it’s also hard work, especially when you’re first getting things off the ground. Sometimes, you have to put in the extra effort, and that can mean working long days and unsociable hours. Undoubtedly, this will impact your life, and the lives of your loved ones, too. Prepare those around you ahead of your investment, and make sure they’re all fully onboard with your plans, and aware of the efforts you’ll have to make.

If your loved ones know what to expect, they’ll be able to be more supportive towards you, and you’ll reduce the likelihood of conflict in your personal life which will, in turn, impact your professional life. You never know - if your loved ones really like the idea of franchising, they might want to get involved, too. Family franchising opportunities are out there, waiting.

3. Neglecting the business model

One of the biggest advantages that you’ll have over new business owners, as a first-time franchisee, will be your franchisor’s proven business model. A model that has, in all probability, paved a path to success for many before you. This business model is there to help you find success, but it’s also there to keep you on the right track, and when you sign your franchise agreement, you agree to follow this model.

Neglect the business model, and you’ll pay the price for two reasons. Firstly, you’ll get things wrong with your franchise, and potentially perform less well financially as a result. Secondly, you’ll risk being found to have breached your franchise agreement, resulting in your franchisor being able to terminate your contract.

The biggest problem I see is that franchisees, especially when they have gained some experience, stop following the system they signed on for and then wonder why things aren’t working as well as they hoped.
– Thomas Boehm, Montessori Kids Universe

4. Failing to engage with training and support

Almost every franchisor will provide their franchisees with extensive training and ongoing support, setting you up for success regardless of your level of prior experience. As a first-time franchisee, your franchisor’s support will be invaluable to your franchise’s growth and development, and to yours, too. Training provides support for franchisees in many different ways, covering:

Operating standards and procedures
The recruitment, retention and management of employees
The training of employees
Marketing, advertising and public relations
Financial management and business administration
Point of sale systems and approved suppliers

If you can’t engage with the training and support provided to you, you’ll likely see severe consequences. You’ll fall behind other franchisees, you’ll risk making business mistakes because you don’t know better, and you might end up damaging the reputation of the business and conflicting with your franchisor. Remember: Any action that brings disrepute to the franchise could be considered grounds for contract termination.

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5. Ignoring the finances

The cost of starting a franchise unit in the UK varies hugely, but the average sits at £42,200 [British Franchise Association]. When you’re starting a franchise, you’ll need to account for more than that initial, listed fee. You’ll need working capital. You’ll need to account, as relevant to your franchise, for rent, fit-out, vehicle leasing and stock and equipment costs.

When you’ve accounted for all of the costs involved, you’ll need to ask yourself whether investing is truly viable, or whether it might push you into financial difficulty. Would you be comfortable taking out a loan? If so, have you looked into the kinds of loan on offer, and the repayment schedules you’d be looking at? Don’t get yourself into hot financial water by over-investing.

Learn, grow and listen, and you’ll become a successful franchisee

As a first-time franchisee, you’re at the beginning of what could be an amazing career. Avoid these mistakes, and you’ll be well on your way. Find more franchisee tips on Point Franchise, like how to set realistic expectations for franchise success, or how to advertise your business like a pro.