15 Mistakes to Avoid When Starting a Franchise

If you’re considering starting a franchise business, you’ve probably seen a lot of sales pitches recently. Franchise teams build super sophisticated sales networks – websites, brochures, sales reps, etc. – all working in sync, non-stop, to sell you their franchise.

What you won’t often hear is that owning a franchise can be just as risky as owning any other small business. That’s why we spoke to a number of current franchisees and franchise experts about the biggest mistakes they made when starting a franchise and what you can do to avoid them.

Mistake #1: Starting off undercapitalized and underinformed.

Do not buy into a franchise where you might be undercapitalized. Running a new business is challenging and not always immediately profitable. You should make sure you have enough capital to operate a few years at a loss or very small profits.

Make sure you have the capital necessary before starting a franchise. You can click here for our overview of the main franchise financing options.

Mistake #2: Fixating on trendy businesses when starting a franchise.

I’d say the top mistake is focusing on a business because it is trendy, rather than one that will best match your interests, skills, and budget.

Take the time to research and find a business model that is both profitable and one you will enjoy doing. The last thing you want to do is invest tens of lakhs of rupees in franchise fees and setup costs only to realize this was not the right business for you.

Mistake #3: Underestimating franchise startup costs in a business plan.

I should have put together a better business plan. You have to get the facts straight before you ever make an investor presentation. And don’t feel like you have to buy the biggest and best of everything – buy used or pre-owned. Even then, plan to spend more than 

Mistake #4: Not following the franchisor’s system.

‘Just follow the system.’ I kept telling this to one of my franchisee several times and they really weren’t. FOLLOWING the SYSTEM. Initially They kept cutting cut corners by not using the things as per our instructions. Then they realized their mistake and after about 6 months they realized that I was right – Their growth wasn’t anywhere near where it needed to be, and I had to run more sales appointments to help them out. Once they started to follow the system completely, I achieved the results I wanted when I first bought the franchise.

Mistake #5: Being distracted by what you can do vs. what you do best.

One person cannot do it all. It is important to realize this so you can evaluate which parts of the business you will handle, and which areas you will hire for.

I hired a CA to ‘babysit’ me each week while I updated my accounts and taking care of other director business. It’s been the best decision of my Life. I can just ask questions rather than wasting time searching for an answer. And as for marketing, what takes a graphic designer 5 minutes takes me an hour or more. So while I am capable of creating new ads, it is smarter for me to hire a graphic designer to do what they do best. This allows me to focus my time on what I am best at developing my staff and working with my clients.”

Mistake #6: Becoming complacent on marketing your franchise.

Some advice I wish I had followed more closely was to never slow down on your marketing efforts, even when you first start to taste success. Don’t settle for complacency! Your marketing efforts have to be ongoing. You need to analyze the effectiveness of each outlet. Then you should share the effective strategies with your fellow franchisees.

Mistake #7: Needlessly straying from your franchise business plan.

Don’t needlessly stray from your business plan without a sound reason. The biggest mistake to avoid is making broad assumptions about your business. Before making changes, you really want to do your research. Get as many facts and data points as possible in order to make good decisions. Don’t assume that other people with industry experience are always correct or always wrong. Look at all the issues, compare the pros and cons, then make a decision that fits within your business plan.

Mistake #8: Thinking you know everything when starting a franchise.

Don’t fool yourself and think that your ‘vast’ business background will automatically make you a successful franchisee. Learn from other franchisees. Foster relationships with other franchisees in your area and around the country. I have learned more from two of the franchisees in my area than I could ever have imagined and I owe my early success in large part to their willingness to help.

You can’t do it all yourself. If you’ve done your homework, you should be part of a franchise system with a good support structure. There should be resources for you to turn to for help, guidance, and advice.

Mistake #9: Ignoring the advice of experienced franchisees.

When 2 of my Franchisees decided to buy our Chaat Chatore franchise, they both had been in the corporate world for many years. When they were first looking to invest in a franchise, they spoke with an existing franchise owner of ours, who shed light on what it is like to be a part of the system, what to expect regarding support from the corporate team, and what an average day is like for a Chaat Chatore franchisee.

Rather than absorbing his advice and following the lead he suggested, they kind of went our own way. They quickly realized that following the systems and processes that the franchisor had developed was the right route to take. Had they listened to the existing franchisee’s advice, it would have saved them from learning many things the hard way. My suggestion to anyone joining a franchise is to follow the playbook the franchisor has developed, as it is already a proven system.

Mistake #10: Expecting a franchise to be a business-in-a-box.

Many new franchise owners expect to buy a business in a box, and when they open that box they expect to have customers waiting at their front door. For most franchisees, that’s not the case. You have to invest time and energy into developing the franchise brand in the territory or region where you’re licensed to operate. While the franchisor supports the franchisee, the franchisee still has to put in time, effort, and energy to grow the business in the local market.

The advantage of owning a franchise is you can avoid a lot of the mistakes small business owners make because there’s a good support structure in place. This is especially true the more mature a franchisor is.

Mistake #11: Forgetting that the customer is always right.

The most important advice I ignored at first is the old saying ‘the customer is always right.’ It’s an easy phrase to hear but until you become a business owner it doesn’t really have meaning. Once you spend time, money, and resources to acquire a customer it is a very important motto to live by. We pay close attention to the customer reviews we get to ensure our customers are always right and happy.

Mistake #12: Thinking you have all the answers.

Vulnerability is an inherent part of starting a business. You will have no clue what you are doing when you first start out. Embrace this, and take every opportunity to learn. The time for real learning is at the beginning. Get better at the soft skills of business early on: conflict management, communication, priority management, and coaching.

Mistake #13: Marketing beyond your staff’s ability to serve customers.

When thinking about opening a franchise, you probably imagine a line out the door on opening day. But, when it comes down to it, the franchisee really needs to think about what the business can handle on opening day. A line out the door is great, but only if the staff is ready to handle it. You have to grow the business strategically. Seriously think about what marketing needs you will have. It comes down to striking a balance.

I have found that getting involved with the community is one of the best ways to market the business. I attend events, shake hands with customers, and look for community fundraising events to get involved with.

Mistake #14: Deviating from franchise continuity.

The hardest part of being a franchisee is learning and adopting all the processes that exist in the brand you’re buying into. But it’s important that a customer can walk into any franchisee’s property across the country and have the exact same experience.

Bonus Mistake – Not Having a Backup Plan for Capital

I have seen this mistake so many times. When a person decides to start a franchise, they tend to quickly run out of money or go negative because they have underestimated the overhead costs associated with running a franchise in the first place. When starting a franchise, it’s always best to have a source of capital to go to if anything goes wrong with the first plan of action. Like I always say, “There is no such thing as being too prepared.

Over to You

Do you own and operate a franchise? We’d love to hear about the mistakes you made early on when starting a franchise and tricks to avoid them. Join the conversation in the comments section below or email me directly with your tips to avoiding mistakes common to franchisees.

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