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When Franchising Your Business Temper Expectations

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Often times a start-up franchisor shares the same expectations as a new franchisee. Both see future success and a smooth road but neglect potential pot holes.

A component of franchise industry growth is built upon a foundation of new franchisors that arise from independently owned businesses. Many of these new franchise companies grow into successful franchise systems. However, there are others that fail to achieve their goals. Several months ago I wrote an article A Startling Franchise Industry Statistic. It revealed that 1 in 6 franchises listed in a leading franchise directory had 5 units or less. The majority of these franchisors have failed to grow because they failed to successfully launch their franchise.

Designing and building the franchise program is an important step in the franchising process, as well as establishing the franchise fee, royalties, territory and other key elements of the franchise program. At this stage in the franchising process the goal is to build the right franchise program and design the tools that new franchisees will need to be successful.

Once the franchise program has been constructed the next step is to launch the new franchise. In my opinion this is where many new franchisors fall short. The best franchise program with the right tools canít overcome an unsuccessful franchise launch.

There are several reasons why some franchisors fail to successfully launch their franchise.

  1. The start-up franchisor either lacks the capital or is unwilling to commit the capital to franchise development.
  2. The franchise program has some flaws that turn off prospects.
  3. The franchisor lacks the staff and/or knowledge necessary to grow the new franchise network.
  4.  The franchisor commits more capital than necessary to the design and building stage of the new franchise and lacks the capital to launch the franchise program.
  5. Overly optimistic advice by franchise consultants creates unrealistic expectations on the part of the new franchise ownership.

How to have realistic expectations:

  1. Businesses considering franchising should gather information from several sources including franchise consultants. Focus on understanding whatís needed to develop a successful franchise system.
  2. Put your ego aside. Unless youíre a franchise expert, business owners need to listen to those who have a strong understanding of franchising. Think walking before running.
  3. Watch how you spend your capital. Devoting the bulk of your capital to building the franchise can be a mistake since you wonít have enough left to develop new franchises.
  4. Recognize that with few exceptions, itís difficult to sell that first franchise.
  5. Donít equate the high cost franchise consultant with quality. There are a number of very effective and knowledgeable franchise consultants that charge a reasonable fee to franchise a business.
  6. Start out with the tools needed to start your franchise program. Unless you have unlimited capital, avoid spending money on high priced slick franchise marketing literature and other tools.  
  7. Whenever possible, make sure you have advice from people who have actually operated and developed a franchise system.

Business owners who are considering franchising their business should recognize that launching a new franchise can be a formidable task. Although, some new franchises get off to a fast start this is the exception not the rule. Be sure to temper expectations and spend your capital wisely.

© 2012 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at franchiseknowhow@gmail.com

 
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