Franchising is a promising way to start a business, but it comes with a set of additional terms and conditions. In Part 1 of this post, we shared the five most common mistakes that new franchise owners could make and why you need to avoid them. In Part 2, we share five common mistakes that you could make after starting a franchise business and how these mistakes could cost you in the long run.
Not taking support from the franchisor
The level of support that franchisors provide to their franchisees varies based on the industry, the size of the business, financial capabilities, classes of the franchise, etc. The franchisor is not only obligated to provide support but also prefers to do it because it helps their business run smoothly at the end of the day. Site selection, initial training, marketing, and other business operations are the areas where a franchisee may (and should) seek assistance from the franchisor.
Even though this assistance is a result of fees that franchisors charge, it can prove to be highly beneficial, especially if you’re inexperienced. The expertise and knowledge of franchisors can facilitate you to make better business choices. A word of caution: make sure you read the agreement carefully and ask the franchisor to include any special assistance related clause (if you have any) along with the standard ones.
Assuming it will be a success
Franchising is a low-risk business proposition, and that’s one of the main reasons why most entrepreneurs opt for it. But, truth be told, franchising does not guarantee success. Both failure and success of your business are mostly dependent on how well you receive setbacks and solve the most commonly occurring problems in your outlet. Wrong location, lack of prior research, mismanagement, etc. may cause your profits to tank at any moment. So, ensure that you make your franchise a priority, regardless of how occupied you are.
Even if you own multiple franchises, you must take out time to focus on each one of them to ensure they are running smoothly and staying up to date with the latest requirements. To run a successful franchise, first of all, develop a CEO mindset. Once you get in the zone, focus on essentials such as following the franchise system, looking after each aspect of your outlet, and cultivating a managerial team that can help you achieve your goals.
Underestimating cash flow
Cash flow means the difference between the amount of cash you had at the beginning of a financial period and the amount of money you have by the end of it. Essentially, this ‘cash’ helps run the day-to-day operations of your franchise smoothly. In case you lack sufficient funds to run a franchise, you may fail to fulfill even the most basic requirements of your business, which could affect the overall functioning.
To manage your cash flow effectively, you must focus on the following aspects:
- Keeping the books in order – not focusing on bookkeeping right from the beginning could lead to the untimely death of your business
- Forecast – cash flow forecasts lets you analyze the deficit or surplus of cash and how to adjust it effectively
- Negotiate whenever you can – negotiations with suppliers and vendors can go a long way in creating extra money to run your business
- Anticipate problems beforehand – identify potential cash inflow problems and avert it before the time arrives
Not following the franchise system
Follow the system. According to experts, this is the one sure-shot mantra to run a successful franchise. Franchising is an effective process because it’s based on a proven successful method. It functions as a business process that has shown exponential results in the past and is expected to show results in the future too. So, if you find a fault or have feedback, bring it to the attention of the franchisor instead of tackling it on your own.
Fixing what’s not broken could not only lead to distrust among your franchisor but also incur your losses. Not sticking to the provided plan has some more implications, too; it hinders the growth and affects their overall business functions. Therefore, if you have a sales problem, follow the sales system and for a marketing problem, follow the marketing system, and so on. Should you still have an intense desire to innovate, it’s better to create your dream brand from scratch and grow it organically on your terms.
Expecting to be the boss
Your approach towards business should be pragmatic and straightforward. So, make sure you first get the facts right and then dive in. Many new entrepreneurs start the business of franchising with the hope of becoming their boss. But, sorry to break your bubble, in most cases it’s not even possible. In other words, while you might be the owner of your outlet, you are not the owner of the brand or the business. Hence, you do not have complete freedom to take all of the decisions, make drastic changes around the outlet, or change the SOP.
Every franchise is expected to follow orders. Along with being accountable, the franchisees are also answerable to the franchisors if something goes wrong, sales do not increase, or the outlet is tanking. If you are someone who wishes to do their thing own way and lead a life wherein they are not professionally bound to report to someone, you must reconsider. As mentioned earlier, starting your own business from scratch might be a better idea.
Franchising can reap unexpected financial as well as personal benefits if you get started on the right note. Your work does not end as you sign the agreement; it is where the actual work begins. If you are planning to invest in a franchise, you must keep the above pointers in mind even once you have bought the franchise to start and run your business without any glitch. Whether a mistake seems grave or straightforward to you, it could cause severe repercussions in the long run, including forfeiting of your assets. If you’re looking to get more information on franchise business opportunities in India, please reach out to us by filling the Investor Enquiry form.