5 Common Franchising Mistakes to Avoid

5 Common Franchising Mistakes to Avoid

According to the U.S. Census Bureau, franchises make up approximately 10 percent of American businesses. Franchising is a popular business solution for inexperienced entrepreneurs because it provides helpful support and structure. However, there are common franchising mistakes that eager entrepreneurs sometimes make.

Failure to Contact Franchise References
Buying a franchise is a major personal and financial decision with long lasting consequences. Buying a franchise can be compared to buying a house. That is, the person in charge may give you a quick tour and provide limited references in order to cover up certain problems. Therefore, it is imperative to take your time to meet and talk with existing or past franchises. If possible, ask the franchise owners you interview for more references. Be sure to have a frank discussion about the major problems that they have experienced.

Failure to Visit the Franchise Headquarters
Franchiser salespeople can be persuasive, knowledgeable and quite competent. However, they do not fully represent the franchise company. It is imperative to meet the field representative and district supervisor. If possible, visit the franchise headquarters and meet with key personnel. This is also an excellent way to verify all of the information from the franchise salesperson. This will also help you to get feel for how you will fit into the franchise sub-culture.

Failure to Carefully Read the Disclosure Document
According to Inc. magazine, failure to carefully read the disclosure document is a major mistake that franchises make. This is because disclosure documents are typically very long, up to 100 pages, and are full of legalistic terminology. However, franchisees should meticulously review the document with a qualified attorney. This will avoid misunderstandings regarding work responsibilities and financial obligations. Being patient and thorough will avoid legal and financial difficulties.

Failure to Document Oral Conversations
Not all franchise communication exchanges are formal meetings with contracts. In fact, a lot of communication informally takes place through follow-up phone calls and face-to-face interactions. However, it is very important to document all conversations for legal purposes. This is because the franchiser may orally promise certain benefits and then later deny them. However, documented oral conversations are an excellent way to legally protect yourself while staying organized.

Failure to Perform Market Research
Franchise pitches from salespeople are generally exciting, persuasive and positive. However, influential marketing data from the regional franchise headquarters may not apply to your local area. Therefore, your local market will need more in-depth market research. Never commit to a franchise without having access to or performing customized local market research. Consider using the Small Business Association (SBA) for local marketing assistance.

While franchising provides excellent commercial opportunities to aspiring entrepreneurs, there are common mistakes that should be avoided. Be sure to contact as many franchise references as possible and visit the franchise headquarters. Thoroughly read the disclosure document and record all oral conversations with the franchiser. Finally, be sure to use local market research for your specific needs.



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