8 Common Franchise Mistakes to Avoid

Buying a franchise can be a great way to start a business, but as with any investment, there are no guarantees. The question “how many franchises fail?” is hard to answer, but research by the Franchise Brokers Association estimates the franchise failure rate may be as low as 20% or as high as 50%.

Sometimes businesses fail through no fault of the owner. Many establishments go out of business during hard economic times. And in the last three years, the pandemic forced once-thriving companies to shut their doors.

But often, the reason a franchise fails has to do with poor business decisions on behalf of the owner. Let’s take a look.

8 Common Franchise Mistakes

1 Insufficient Research

Savvy entrepreneurs educate themselves about the pros and cons of any investment before they part with a dime. It’s crucial to weigh the advantages and disadvantages of franchises you’re considering in order to make an informed decision. Start with online research, visit franchise expos and conventions, and talk with existing franchisees.

The U.S. Small Business Administration keeps track of the default rate for SBA loans taken out by franchisees. A high default rate may indicate a problem with the franchisor.

2 Poor Financial Planning

Franchise ownership requires financial commitment. Overextending your budget can be a critical error. Assess your financial capacity realistically; be sure to consider franchise fees, equipment costs, and working capital. Seek financial advice to ensure your financially prepared for the venture.

3 Not Consulting a Lawyer

Franchise disclosure documents (FDDs) and franchise agreements are legal documents specific to the world of franchising. As a new franchisee, it’s a mistake to assume you can understand the nuances of these documents without help. To avoid rookie franchise mistakes, it’s best to have an attorney that specializes in franchising review them with you.

4 Ignoring Franchise Systems

Through trial and error, franchisors develop their own systems and procedures for running their business. As a franchisee, you get access to this proven business model. Deviating from it can lead to operational inefficiencies as well as conflicts with the franchisor. Worst-case scenario, you might be held in violation of your franchise agreement and required to pay penalties or even forfeit your right to franchise.

If you consider yourself a maverick who prefers to do things your own way, franchising may not be right for you.

5 Poor Location Choice

Choosing a location without carefully examining factors like traffic, competition, and market demand can negatively impact your business. Before you decide where to franchise, conduct a thorough market analysis and demographic study to select a location with high potential for success.

6 Neglecting to Market Locally

Yes, one of the benefits of franchising is the marketing support the franchisor provides for the brand. But it’s a mistake to rely solely on these efforts. Even though you’re part of a franchise, you’re also a local business. You need to utilize social media, local events, and community engagement to build brand presence.

7 Expanding Too Quickly

While growing your business is a valid goal, many new owners make the mistake of trying to expand without the necessary resources and management capabilities in place. You should focus on optimizing current operations before opening additional locations.

8 Not Choosing a Trusted Brand

Selecting a franchise with an unproven track record may be the biggest mistake of all. You can avoid a lot of headaches by only considering franchises with a history of success, like Home Franchise Concepts (HFC) brands.

Home Franchise Concepts has been in franchising for more than 30 years, and currently oversee 10 well-known home services brands: AdvantaClean, Aussie Pet Mobile, Bath Tune-Up, Kitchen Tune-Up, Budget Blinds, Concrete Craft, Lightspeed Restoration, PremierGarage, The Tailored Closet, and Two Maids. Each brand comes with a proven business model and a commitment to franchise support.

Contact Home Franchise Concepts Today

As you continue to research franchising, take a look at our diverse range of franchise opportunities available. With our experience and dedication to franchisee support, we can help you avoid the most common franchise mistakes and build a business of your own. To get started, connect with us today.