5 common franchise mistakes to avoid at all costs

Don’t make these mistakes if you want a fulfilling life as a franchisee

An often used characterisation of the franchise model is that buying a franchise is akin to buying a ‘business in a box’.

In some ways, this oversimplification seems fair. The brand is established, the operation and systems manuals are provided and the new owner participates in training and is offered onboarding support to help ensure a successful launch.

It’s pretty simple - and very appealing to many prospective business owners Further adding to the allure of buying a franchise is the number of choices and the affordability of many brands.

But here’s the irony: it’s precisely this appeal that creates the most prominent pitfalls for franchisees.

Over the last few years I’ve met with and interviewed people involved with the franchise industry at many different levels. I write, speak and teach about how we can collectively increase the success of franchisees, franchisors and their investors.

And I’ve been on the other side. I was a hands-on owner of a Kids R Kids Academy franchise and exited after 15 years. I left with a rock solid appreciation of how franchising changes lives, including mine.

Here is my list of the most common pitfalls for franchisees and how they can be avoided:

Franchisee due diligence is fast-tracked

The attraction of business ownership is a powerful force and can lead a prospective franchisee to sign a franchise agreement before proper research has been done.

Barbara Garcia is director of human resources for TBC Corporation, one of North America’s largest marketers of automotive replacement tyres through a multi-channel strategy, which through a subsidiary owns the Big O Tires and Midas franchise systems. She has over 20 years’ industry experience and suggests prospective franchisees think about the decision process as a journey that includes much more than looking at the numbers.

At a recent Titus Center for Franchising advisory board meeting, Barbara shared this advice: “Get to know the ethics, values and culture of the franchisor. Spend time with the employees at the corporate office. Do they reflect the mission? Are they highly engaged and aligned with the brand?” If not, that should be a red flag. She sums it up this way: “Date first before you get married.” Her analogy is very fitting. A franchise agreement typically lasts for 10-20 years, so don’t rush the exploratory process, as mistakes can be painful and expensive.

Not following the franchisor’s system

Thomas Boehm is president and co-founder of Montessori Kids Universe, a franchise with approximately 30 units.

He says: “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.”

I concur. When I enthusiastically followed the prescribed system, my business ran smoother. When I veered or tried to skip steps, problems generally followed. Regardless of the size of the system, it’s a common pitfall. Follow the system you signed on for to avoid it.

Lack of planning

Planning is the most fundamental management process that exists. Planning does not guarantee success because plans must be executed. However, there is no long-term success without a well constructed plan for growth, loyalty and being competitive. This premise applies to franchised and non-franchised businesses and is widely emphasised in business management courses - including mine.

Basic plans should focus on monthly and annual revenue, plus profit and expense numbers. A franchisee who plans well and tracks results will identify new trends, consumer cycles and other opportunities on which to capitalise. Thoughtful and disciplined planning leads to higher income and long-term success.

Failure to engage

Like trust and relationship building, engagement has caught the attention of seminar speakers, business writers and human resource experts. And for good reason.

According to the latest Gallup poll, only 34 per cent of employees are actively engaged. The good news? This is the high water mark since Gallup starting tracking engagement numbers in 2000.

If we apply a basic 80-20 rule, then anywhere from 10-20 per cent of franchisees are disengaged. These are the investors who wanted the business to be literally in the box. To them, the franchisor is responsible for their success, but nothing could be further from the truth.

Without engaging with your staff, clients, local community and franchisor, your enterprise will not be successful long term. It may coast along for a few years, but the joy of being part of something meaningful and making the kind of money you dreamed of will be out of reach. Eventually, the unengaged franchisee will wind up in a very dark pit.

When it comes to making the big decisions in life - like buying a franchise - the answers don’t usually come easily. Whether you’re thinking about ownership or are in the early years of your franchise adventure, know there will always be challenges and people in the industry who want to help you become as fulfilled as you want to be. It’s well worth the effort.

Not developing yourself and others

With ownership comes an inherent but frequently ignored responsibility to develop yourself and those you employ.

Developing employees by offering cross-training, paying conference fees and creating opportunities to learn skills such as meeting planning, designing surveys or building incentive plans builds loyalty and increases job satisfaction.

Increased loyalty and job satisfaction are morale boosters that trickle down through the ranks and contribute to the bottom line by reducing staff absenteeism and turnover, while increasing productivity at the same time. As consumers, we know that happy employees attract new clients. However, it doesn’t stop there.

Franchisees should also continue their education. Think of it as getting out of the box in order to think out of the box. Attend annual or bi-annual franchisee meetings or industry specific conferences and read a minimum of one business book a year. This habit refreshes perspectives, increases motivation and helps franchisees resolve nagging frustrations.

The author

Christy Wilson Delk is a business professor and franchise industry writer and speaker