Buying a franchise usually starts off as exciting and exhilarating, but franchise veterans will quickly tell you that after the excitement comes stress and more stress. There are so many things to consider when it comes time to buy a franchise (as well as before you buy), and it can be overwhelming. The worst situation, however, is when a wannabe franchise owner doesn't take on the stress and ask the right questions.
This leaves the door open to a lot of mistakes, and while a few mistakes are natural and inevitable, too many people are still making the 5 biggest mistakes of all: Not worrying about legal issues, not understanding the market, not spending time with other franchise owners, thinking you're going to be completely independent, and not thinking of an exit strategy.
Top 5 Biggest Mistakes Wannabe Franchise Owners Always Make
Fortunately, these five big mistakes that happen when buying a franchise can be easily avoided if you're aware they exist in the first place. Consider the mistakes below and what they can really mean to your big picture:
1. Not understanding the market or doing proper research.
In other words, going for trendy and something you care about over something that is actually needed in your area can be a huge mistake. You have to think about the market for that franchise and whether or not you're going to have a customer base. Is there a need for this business? Is this type of business or the product that the business sells doing well? Will location be a factor? Will the market be changing anytime soon? The company could be trendy or a passion project for you, but that's not usually going to be enough to succeed.
"Common mistakes that many people make when looking for a franchise to invest in, are the basic due diligence steps that should be conducted before moving forward with any franchise investment," says Dan Adelstein, Director of Franchise Development and Real Estate with Orangetheory Fitness. "Prospective franchisees need to first ask themselves; do I have the time to personally invest into building my own business? Do I have enough capital to sustain me through the early growth stages? Do I have the proper funding? You would be surprised how many people do not take these steps and jump in without knowing how deep they're jumping."
2. Not spending time with other franchise owners of the business you're contemplating.
Too many people go into buying a franchise talking to everyone they know--family and friends, lawyers, business developers or workers, etc.--but they forget the most important to talk with; another person who owns the franchise you're thinking about opening. Nobody knows that business better than other owners, so they have invaluable insight into the online aspects of franchise ownership, market research, customer behaviors, etc. that can help you make decisions. The sooner you talk to these folks the better, but missing this opportunity this is a surprisingly common mistake made.
3. Thinking you will be able to be independent.
Many go into franchise ownership because they want to be their own boss, but this isn't the reality. We talked with Greg Marco of Franchise Expo about this topic, and he said, "When it comes to operating their business, franchisors--just like entrepreneurs--tend to trust themselves and no one else. Meanwhile, franchisees are expected to trust their franchisors. As an entrepreneur, you'll have to tame your independence and trust the franchisor. After all, the franchisor knows the system better than you do--at least when you're just getting started--so put down your guard and trust."
In other words, you have to really consider whether or not franchise ownership is right for you for other reasons. Too many franchise owners go into the process with this wrong mindset, and it can send your business plummeting if you're not careful.
4. Not learning how to implement the system.
Piggy-backing off of the last point, as a franchisee, your job simply is not to re-invent the system; it's to follow the system. In other words, you have to learn how to implement the operating system and following training programs. It's incredibly important that a franchisee has a documented plan of action for implementing the system and spends time really learning how running this franchise will work.
5. You have to walk before you run.
You wouldn't be an entrepreneur if you didn't want to operate multiple businesses, but once again it's important to learn how to implement the system before you open multiple units. In franchising, it's possible to open multiple units of the same brand, but franchisors want to see a franchisee succeed in one unit before opening a second or a tenth! In franchising, it's also possible to open multiple units of different brands, especially if the same franchisor owns the brands, but if multiple franchisors are involved, you can expect some resistance. The best advice here is to prove yourself in one brand first. Walk before you run!
Marco summed up owning a franchise by saying, "buying a franchise isn't for everyone. However, if and when you make the commitment to become your own boss, and you do all your homework and invest in a franchise model, follow the model, and work hard. It appears in franchising, the harder someone works, the luckier they get."