Buying a Franchise: Potential Pitfalls

Buying a Franchise: Potential Pitfalls

Before buying a franchise, check carefully for these five danger signals, says Meredeth S. Jones

According to the SBA (Small Business Association), 50% of all independently owned small businesses fail within the first five-years of operations while only 5% of all franchise locations fail.

Instead of tackling the obvious 50%, let’s focus on the 5%. Although there is obviously less risk in buying a franchise, here are the top five reasons why a franchise may not succeed and what you need to consider before buying a franchise.

1. Not the right fit. You may not be the right fit for the type of franchise you are considering. Do you have the skills it takes to run the type of franchise you are considering? In the service industry, such as a pest control or home services repair franchise, you are going to be responsible for selling your business on a local level.

Are you comfortable with selling and marketing yourself? In a child enrichment franchise, you will be working with children and parents every day. Do you have the disposition to work with children? Consider the industry and make sure you have the skills and personality for the business.

2. Poor Franchisor support. Lack of operational and marketing support from the Franchisor. Is the Franchisor properly training their Franchisees? Often times, the initial training program may be strong, but once the business opens, there must be on-going operational support from a corporate level. What about on-going marketing support?

Franchisors should have a dedicated team to help market your business prior to opening and to support you with ideas and materials after opening for local level marketing efforts.

After all, you are buying into a franchise which should have tried & true systems in place to help make you successful. Talk to existing franchisees that have been open at least one or more years and find out how they are being supported.

3. Lack of funds. Just having the capital to meet a Franchisor’s minimum financial requirements are not going to be enough. Think about how you are going to pay the bills before you start making a profit.

If you do not have the additional funds immediately available, building in additional working capital into your business loan is a safe way to ensure you can sustain your new business, financially.
 
4. Poor location. Is the brand’s success contingent upon an A+ location in the market? Understanding the franchise’s site criteria for optimal success is key. Not only where you need to be, but what percentage of your sales the occupancy cost will be. A rule of thumb in franchising, a safe percentage is anywhere from 8-10%.

5. The Franchise model is flawed. Sometimes a brand is good “on paper” only. This can be for a number of reasons. Lack of experience, complicated operations, lacking in the systems & processes needed to support franchisees, not enough staff at the corporate level, etc.

A solid way to avoid some of these pitfalls is simply doing your due diligence on a brand. Don’t just take the Franchisor’s word for how great they are, go out and talk to as many Franchisees as you can. Not just by phone, but in person.

ABOUT THE AUTHOR

Meredeth S. Jones is the Founder of two chicks consulting, a boutique consulting firm with over 20 years combined franchise sales & development change agent expertise improving and streamlining the franchise sales/development process for Franchisor’s across multiple industries to include restaurant & bar, retail, health & wellness, and childcare. Increasing overall store count and Franchisor profitability. Due to Meredeth’s diverse franchise sales & operations experience, she is uniquely positioned to also provide consulting services to Entrepreneurs looking to own their own business. https://www.linkedin.com/in/meredethsjones/

Global Franchise Meets.

An inspirational new web video series where we meet the business leaders and influencers in International Franchising.

you may be interested in

franchise directory

  • TaxAssist Accountants

    Business & Professional Services, Financial Services, <100K, Featured

  • Cafe2U

    Food & Catering, Coffee, Take-away, <100K, Featured

  • 800 Pizza

    Food & Catering, Fastfood, Pizza, Take-away, Featured

view more
Connect with Linkedin Logo
Global White Logo Click Here
Close button

WHAT DO WE USE YOUR INFORMATION FOR?

Any of the information we collect from you may be used in one of the following ways: To personalize your experience (your information helps us to better respond to your individual needs) To improve our website (we continually strive to improve our website offerings based on the information and feedback we receive from you) To improve customer service (your information helps us to more effectively respond to your customer service requests and support needs) To process transactions your information, whether public or private, will not be sold, exchanged, transferred, or given to any other company for any reason whatsoever, without your consent, other than for the express purpose of delivering the purchased product or service requested. To administer a contest, promotion, survey or other site feature To send periodic emails The email address you provide for order processing, will only be used to send you information and updates pertaining to your order. Note: If at any time you would like to unsubscribe from receiving future emails, we include detailed unsubscribe instructions at the bottom of each email.

HOW DO WE PROTECT YOUR INFORMATION?

We implement a variety of security measures to maintain the safety of your personal information when you place an order or enter, submit, or access your personal information We offer the use of a secure server. All supplied sensitive/credit information is transmitted via Secure Socket Layer (SSL) technology and then encrypted into our Payment gateway providers database only to be accessible by those authorized with special access rights to such systems, and are required to keep the information confidential. After a transaction, your private information (credit cards, social security numbers, financials, etc.) will not be stored on our servers.

DO WE USE COOKIES?

Yes (Cookies are small files that a site or its service provider transfers to your computers hard drive through your Web browser (if you allow) that enables the sites or service providers systems to recognize your browser and capture and remember certain information. We use cookies to help us remember and process the items in your shopping cart, understand and save your preferences for future visits, keep track of advertisements and compile aggregate data about site traffic and site interaction so that we can offer better site experiences and tools in the future. We may contract with third-party service providers to assist us in better understanding our site visitors. These service providers are not permitted to use the information collected on our behalf except to help us conduct and improve our business.

DO WE DISCLOSE ANY INFORMATION TO OUTSIDE PARTIES?

We do not sell, trade, or otherwise transfer to outside parties your personally identifiable information. This does not include trusted third parties who assist us in operating our website, conducting our business, or servicing you, so long as those parties agree to keep this information confidential. We may also release your information when we believe release is appropriate to comply with the law, enforce our site policies, or protect ours or others rights, property, or safety. However, non-personally identifiable visitor information may be provided to other parties for marketing, advertising, or other uses.

THIRD PARTY LINKS

Occasionally, at our discretion, we may include or offer third party products or services on our website. These third party sites have separate and independent privacy policies. We therefore have no responsibility or liability for the content and activities of these linked sites. Nonetheless, we seek to protect the integrity of our site and welcome any feedback about these sites.

CHILDRENS ONLINE PRIVACY PROTECTION ACT COMPLIANCE

We are in compliance with the requirements of COPPA (Childrens Online Privacy Protection Act), we do not collect any information from anyone under 13 years of age. Our website, products and services are all directed to people who are at least 13 years old or older.

ONLINE PRIVACY POLICY ONLY

This online privacy policy applies only to information collected through our website and not to information collected offline.

TERMS AND CONDITIONS

Please also visit our Terms and Conditions section establishing the use, disclaimers, and limitations of liability governing the use of our website at globalfranchisemagazine.com/terms-conditions

YOUR CONSENT

By using our site, you consent to our online privacy policy.

CHANGES TO OUR PRIVACY POLICY

If we decide to change our privacy policy, we will post those changes on this page

CONTACTING US

If there are any questions regarding this privacy policy you may contact us using the information below. All correspondence relating to the Website should be sent to: Global Franchise 21/23 Phoenix Court Hawkins Road Colchester Essex CO2 8JY Email: subscriptions@aceville.co.uk