In 2016, the International Franchise Association released a statement that said the health of the franchise industry had been growing for the last five years. This data and the notion that franchising a business is an easy route to take to have a passive income make it attractive to franchisers and franchisees alike. People are learning how to franchise.
However, knowing how to do it properly is just one side of the coin. The other rests on knowing what not to do for the business to survive. Here are some of them.
Be Not be open to all advice
In a Forbes article written by Chris Myers, a contributing writer, it stated that unemployment and franchising are positively correlated. What this means is that as more people become unemployed, more individuals turn to franchising. This could be their way to “buy employment” as Myers put it. However, since the unemployment rate is declining according to the Bureau of Labor and Statistics, it could also mean that the number of individuals looking to buy their employment through franchising is low. What to follow can be confusing.
The opportunities will soon be about quality and not quantity, and the only people who can help you thrive are the ones with lasting concepts and proven track records.
Do NOT dive into it too quickly
Rookies in the franchising world are often advised to “go for it” because franchising a business is relatively cheaper than starting up your own company. However, industry expert Tom Portesy warns against this.
While franchising may cost less than starting from scratch, you still need to have enough money until your franchise breaks even. So at the outset, you should know how much the working capital is necessary plus the purchase cost and opening inventory. Just because a business costs $40,000 to franchise doesn’t mean that’s the only amount you need to run the company.
If you’re the business owner looking to franchise your business, your concern is not about having enough money but looking for the best franchise partners that won’t jeopardize your company’s product or service quality. Also, consider the demand for your product or service. What is it going to be like in five or ten years?
To make the long story short, careful planning is needed in franchising.
Do NOT choose new trends
Just because it’s trendy doesn’t mean you should franchise it—whether as a franchiser or franchisee. A lot of businesses succeed when the demand is there—when it’s trending—but where do they go when the market’s taste has changed?
So as a franchisee you have to go for one that has stood the test of time or at least has a Plan B if the industry health and consumer preferences have turned the tide on the business’ performance. Look at their business plan and ask for more details about it.
As a franchiser, incorporate steps on how you plan to bounce back should the market turn its back on you. This should help you attract more long-term franchise partners. Have plans to improve and don’t get stuck in neutral or, worse, in self-sabotage.
Business franchising is a serious venture; hence, you should take all the steps necessary to ensure it is a success. Consulting with industry experts is the first step; planning carefully and not letting trend be a deciding factor are next.