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Franchise-Pitfalls_Body.jpgby Heather Chaet.


If you plug “successful entrepreneur” into the GPS system of life, the number of roads to get to that destination are plentiful. One road many eagerly decide to follow involves buying a franchise. Enticed by a pre-tested business model, built-in structures, and, often, a known brand, new franchisees believe their journey to wealth will be a smooth and comfortable one. However, the highway to a successful franchise can be filled with potholes, which, if you aren’t careful, could put you on a direct detour to failure. So, to help you chart your path, we’ve identified the main roadbumps to avoid as a franchise owner.


1. Choosing the wrong franchise--or any franchise

With so many franchises out there, it’s easy to be attracted toward those with the most monetary success stories, but that shouldn’t be what drives your franchise selection. “Don't just follow the money, follow your heart,” says Troy Hazard, serial entrepreneur, owner of 11 businesses over 20 years, and author of the book Future-Proofing Your Business. “Look to do something you love or that you have an interest in first, Hazard says. “There is no use running a dog washing franchise if you don't like animals, or a fast food franchise if you have no affinity with cooking or preparing food. Love what you do, and your customers will love you. The money is a byproduct of your passion for the business.”


Stephen Bienko, president of Bienko Enterprises and owner of the College Hunks Hauling Junk and Moving franchise, agrees. “You need to have passion for the industry first and the brand you are investing in second,” he advises. “At the end of the day, you are still in the food industry, or automotive, or cleaning, or finances.” The brand can change, but the industry will stay the same. Before jumping in, picture yourself five or 10 years in the future to get a feeling if you will still enjoy being around that industry. “Those that don't love their industry with a burning desire and then have the customary first three-year bumpy road begin to feel buyer's remorse, which will deeply affect your bottom line,” notes Bienko.


In addition, remember not everyone is cut out to be a franchise owner. Examine if the franchise business model is a good fit for your own strengths and weaknesses as an entrepreneur. Do you like following rules or are you more of an innovator? Do you enjoy being held accountable and having oversight, or do you prefer the feeling of being your own boss? Figure out if you have core qualities that a franchise owner needs, no matter what industry it may be.

Franchise-Pitfalls_PQ.jpg2. Not knowing the business model or the contract terms

Each franchise has a distinct business model with specific agreements and territory rules--do due diligence and work through every angle of running the franchise before you invest. “One of the most common problems for new franchise owners is not understanding the business model, thinking that understanding the product is good enough,” says Adam Heitzman, managing partner at “The truth is, the business model of that franchise is going to determine whether you sink or swim. That means understanding things like staffing and overhead, revenues and profits, expenses, and the order in which everything occurs, he adds. “It will take some time to get the hang of things, but this knowledge is going to be incredibly valuable as you work to grow and be successful.”


Managing partner at SG Law Group Senen Garcia counsels business owners on franchises and advises his clients to know all elements of the agreement contract, everything from large issues such as the territory where you can or can’t promote your business to smaller concerns such as how the franchisor will expect to be paid (direct deposit, wire transfers, etc.). Those details impact not only your day-today operations, but also your profit margins. “Consider vendors,” says Garcia. “All franchises are supposed to look similar to provide a certain amount of continuity. To achieve this continuity, franchisors normally select vendors to achieve this goal. On many occasions, franchisors may not allow franchisees to go outside the use of these vendors even if you find identical items for much less. It is imperative to communicate with your franchisor before any financial hardships arise.”

3. Believing the franchisor will always be there for you

You have a vision for your success. As a franchisee, be sure the franchise opportunity you choose also has a vision--especially for when they aren’t around. “If the franchisor doesn't know where they are going, then how can they possibly lead you?” points out Hazard, who encourages possible franchisees to perform a detailed analysis of the franchisor. “Ask questions about their one-, two-, five-, and 10-year business plans and any exit plans they have for the business. Do they know what they are going to do when they want to get out of the business, and how will their exit affect you, should you still be part of the group at that time?”


Relying too fully on the franchisor for business knowledge and tactics is a common pitfall Bienko sees new franchisees suffer. “You cannot sit back and assume the franchisor is going to have all the answers for your success,” says Bienko. Remember the resources and leadership you have now may not always be available--the profitability of your franchise is ultimately up to you.


SBC newsletter logo.gif4. Not getting professional help

When kicking off this journey into the world of franchise ownership, you will talk with your family and friends, all of whom will inevitably offer advice. Helpful? Possibly, but what you really need is the wisdom of professionals. “Get some advisors involved in the process--your accountant, your attorney and maybe an external consultant for another objective professional and qualified opinion,” says Hazard. “Don't rely on family and friends to help you with this process. They have an emotional interest in you, and, in many cases, their opinions will be based on the romance of you being in that business rather than a true perspective of your financial future.”


“Hiring professionals is one area where you should really splurge for your potential franchise,” suggests Heitzman. “Remember that this is a huge investment of both time and money, so you don't want any surprises when you finally take the plunge. Gaining professional assistance such as accounting, banking, insurance, and even legal is going to help you make sure that success is in your future. Find professionals that have experience with franchise and small business matters.”

5. Failing to tap into the power of your employees

As the owner of the franchise, you are responsible for every aspect of it, but that doesn’t mean you should be a one-person franchise machine. Your employees are not only the face of your franchise, but a key element in its success. “Work on the business and not in the business from day one. Build your inside team so you can concentrate on growth and sustainability,” says Bienko. “You must attract the very best people you can find in your industry--your pot of gold is held by the team members you hire. Their education in the workplace and self-development will be the deciding factor to your success. They must be successful first, and then the company will follow.”

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