What are the five biggest mistakes that most people make when franchising?

In my mind, the following mistakes in franchising all come under the umbrella of not understanding what a franchise is all about.

Mistake One

Thinking the existing business will form the franchise outlet and only getting a legal agreement and operations manual based on that. Invariably, to be successful as a franchise, you are going to have to make significant changes to your existing business, simplifying it around the specific needs of your target market and the likely skills of your future franchisees.

As a business owner, you almost certainly have a spark of entrepreneurial spirit, with a tendency to keep adding things to your simple business idea. You do not want your franchisees to be as free-spirited as you. They need to follow the rules.

Mistake Two

Not understanding a franchise group is comprised of two business entities — your franchisee outlets and your franchisor business.

Balancing the interaction between the two makes for a successful franchise.

The franchise legislation only requires you to prepare legal agreements and operations manuals around your franchise outlets. However, to run your franchises successfully, you really need to make sure you develop your whole franchise system so that all the interacting subsystems pull together as one.

Example franchise system

Franchisor / Outlet responsibilities

  • Look after the brand
  • Some local marketing for franchisees
  • Manage support systems (operations manuals)
  • Provide induction, support and training
  • Keep franchisees accountable
  • Supply of product to franchisees
  • Recruit new franchisees
  • Manage your franchisor business

Franchisee outlets

  • Delivery of product or service to client
  • Some local marketing
  • Recruit, train and manage staff
  • Manage their franchisee business
  • Provide data to the franchisor

Note — the franchisor list is longer…

If you do not plan how you are going to look after the interacting aspects of the brand, local marketing, induction, support and training and supply of any product to franchisees, neither your franchisor business nor your franchisee businesses will perform as they should.

Mistake Three

Not balancing your franchisees’ personality and skill profiles with the tasks needed in each franchise outlet.

New franchisors without an understanding of franchising will really not understand the interaction between franchisee personality profile and the tasks you expect your franchisees to do in servicing your clients. They will just recruit anyone in the same way as they recruit staff.

This approach does not provide optimal results. You need to understand exactly the kind of person to look after your clients and, once they have been carefully recruited against a list suitable personality, skill and other criteria, give them all the support they need to get the job done and bring in the money.

Mistake Four

Not getting the money right. Everyone will suffer if you do not go through detailed budgets for every part of the franchise structure to make sure you have a handle on:

  1. What each person will do
  2. The territory they will cover
  3. Likely income which will come into each franchisee
  4. The amount it is going to cost to run each part of the franchise group
  5. How much each franchisor service to your franchisees will cost on start-up and in the long term
  6. The fees and charges which will be imposed

This list of the mistakes people make when franchising is not exhaustive and needs input from specialist franchise consultants and accountants.

If you would like to know more, I suggest you go to https://franchisesimply.com.au/ and order my latest book, How to franchise my business simply and perhaps organise to have a chat with me or one of my expert team.

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