The Most Common Mistakes New Franchisees Make and How to Avoid Them

Franchisee doing research online

Franchising, like any other business venture, can take a lifetime to master. Along with experience comes mistakes, sometimes they can go hand-in-hand. For those starting out in franchising, the mistakes of others can be a rich source of information & salutary tales: it’s better to learn from the franchise mistakes of others rather than to make your own if you can possibly help it. With that said, here are some of the most common mistakes that new franchisees make.

1. Insufficient Research and Due Diligence

New franchisees may not thoroughly investigate the franchise opportunity. This includes failing to understand the market, the competition, or the financial requirements. They might not scrutinise the franchisor’s history, reputation, or the experiences of existing franchisees. Here’s what you can do to minimise your chances of making this mistake:

Investigate the Franchise: Study the franchise’s history, financial performance, and the franchisor’s reputation. Talk to existing franchisees to gain insights into their experiences.

Analyse the Market: Understand the local market demand, competition, and any potential barriers to entry. Ensure that your franchise has a solid customer base in the chosen location.

Belvoir Group’s policy is to walk through the company’s history & to enable prospective franchisees to speak to those who are currently in business in order to get a realistic expectation of what the business will be like and whether it is a good fit.

2. Underestimating Costs

Many new franchisees underestimate the total costs involved, including initial fees, ongoing royalties, marketing fees, and unexpected expenses like renovations or additional staffing. They may also fail to account for working capital needs during the startup phase when revenue might be low.

Here’s what you can do to minimise your chances of making this mistake:

Create a Detailed Budget: Include all costs—franchise fees, royalties, marketing fees, lease or property costs, and working capital. Factor in a buffer for unexpected expenses.

Plan for Working Capital: Ensure you have enough working capital to cover operating expenses for at least 6-12 months until the business becomes profitable.

Belvoir Group will help you determine your finances and will work with you to maximise your chances of profitability from day-one.

3. Choosing the Wrong Franchise

Some franchisees select a franchise based on trends or personal interests without considering whether it’s a good fit for their skills, experience, or local market demand. This can lead to poor performance and dissatisfaction. Here’s what you can do to minimise your chances of making this mistake:

Align with Your Skills and Interests: Select a franchise that matches your skills, experience, and interests. This will make managing the business more enjoyable and increase your chances of success.

Evaluate the Franchise Model: Consider whether the franchise model fits your management style, desired level of involvement, and financial goals.

Our aim is to find franchisees that will fit with our group & ethos. We all want to be pushing at an open door rather than being at loggerheads as energy that could be spent moving your business forwards is otherwise lost.

4. Inadequate Financing

New franchisees might not secure enough financing, or they may rely too heavily on loans without a clear plan for repayment. This can put them in a precarious financial position, especially if the business takes longer than expected to become profitable.

Here’s what you can do to minimise your chances of making this mistake:

Explore Financing Options: Research all available financing options, including loans, savings, and investment partners. Ensure your financing plan is sustainable and aligns with your cash flow projections.

Maintain a Financial Cushion: Keep a reserve of funds for emergencies and unexpected expenses, so you’re not caught off guard.

When working together, we give our franchisees complete costings reflecting what they will need in order to start & build their business. Ensuring franchisees are on the front foot with regard to finances is vitally important. In addition, we have excellent relationships with a number of banks that find franchise businesses particularly attractive to lend to because of their high chances of success and the fact that their business model has been proven.

5. Neglecting the Franchise Agreement

Some new franchisees do not fully understand the franchise agreement’s terms and conditions, including territorial rights, obligations, or exit strategies. This can lead to conflicts with the franchisor or legal issues down the line.

Here’s what you can do to minimise your chances of making this mistake:

Seek Legal Advice: Hire an attorney who specializes in franchise law to review the franchise agreement. Make sure you fully understand all terms, including your rights, obligations, and exit strategy.

Clarify Terms: If any part of the agreement is unclear, ask for clarification before signing. Don’t assume anything—get all details in writing.

For us, a clear understanding of the franchise agreement is extremely important. We want to work closely together with our franchise partners & want everyone to be on the same page. The clearer we are from the outset, the more time you & we can spend growing the business and the brand.

6. Poor Location Selection

Location is crucial for many franchises, especially retail or food service. New franchisees may choose a location based on cost rather than foot traffic, visibility, and accessibility, leading to lower customer turnout.

Here’s what you can do to minimise your chances of making this mistake:

Conduct a Location Analysis: Evaluate potential locations based on factors like foot traffic, accessibility, visibility, and proximity to target customers.

Consult Experts: Work with real estate professionals and the franchisor to identify the best possible location.

7. Inadequate Training and Support Utilization

Franchisors often provide training and support, but new franchisees might not take full advantage of these resources. Failing to learn the systems, processes, and best practices can hinder their ability to run the franchise effectively.

Here’s what you can do to minimise your chances of making this mistake:

Attend All Training Sessions: Engage fully in the franchisor’s training programs. Learn the systems, processes, and best practices inside and out.

Utilize Ongoing Support: Regularly consult with your franchisor and seek advice or support when needed. Don’t hesitate to ask questions or request additional training.

Belvoir Group provide an intensive four-week training programme, we get new franchisees together to learn & to network & we provide ongoing training & resources for all key roles within your business so that you can take on members of staff that can generate profit for your business instead of the costs of getting them up-to-speed.

8. Overlooking Local Marketing

While the franchisor may handle national marketing, local marketing is often the franchisee’s responsibility. New franchisees sometimes neglect this aspect, leading to insufficient local brand awareness and customer engagement.

Here’s what you can do to minimise your chances of making this mistake:

Develop a Local Marketing Plan: Create a tailored marketing plan that addresses your local market’s specific needs and preferences. This could include community events, local advertising, and partnerships with other local businesses.

Leverage Digital Marketing: Use social media, local SEO, and online advertising to build local brand awareness and drive traffic to your franchise.

Belvoir Group have an excellent marketing team that we believe is the best in the business. We work hard to grow & develop the brand & will help you to grow & develop your reputation within your territory.

9. Micromanaging or Not Managing Enough

Some new franchisees struggle with finding the right balance in management. Micromanaging can lead to burnout and stifle employee initiative, while being too hands-off can result in poor service quality and operational inefficiencies.

Here’s what you can do to minimise your chances of making this mistake:

Empower Your Team: Train and trust your employees to manage daily operations, but maintain oversight to ensure quality and consistency.

Be Present: Stay involved in the business without micromanaging. Regularly check in on operations, customer service, and employee satisfaction.

10. Ignoring Competition and Market Changes

New franchisees might assume that following the franchisor’s model is enough without monitoring local competitors or adapting to market changes. This can lead to missed opportunities or declining market share.

Here’s what you can do to minimise your chances of making this mistake:

Monitor Competitors: Keep an eye on what your competitors are doing and adjust your strategy as needed to stay competitive.

Adapt to Market Trends: Be flexible and willing to adapt your offerings or marketing strategies to meet changing customer preferences and market conditions.

11. Not Building Relationships

Relationships with other franchisees, the franchisor, and local community members are vital. New franchisees may fail to network effectively, missing out on support, advice, and potential business opportunities.

Here’s what you can do to minimise your chances of making this mistake:

Network with Other Franchisees: Join franchisee associations or networking groups to share experiences, gain advice, and find support.

Engage with the Franchisor: Maintain a positive relationship with the franchisor, keeping lines of communication open. Provide feedback and stay informed about new developments.

We encourage you to build relationships with us & with other franchisees. Our business development managers can make things happen, our regional networking groups can provide a regular place for you to learn from & network with others & our annual conferences are an excellent opportunity to leave the office & to enter a completely new environment with new opportunities.

12. Expecting Immediate Success

Some new franchisees expect quick returns and become discouraged when the business doesn’t immediately take off. Building a successful franchise takes time, and unrealistic expectations can lead to poor decisions. Although the chances of success are far greater with franchises than new businesses and although Belvoir Group franchisees are given a ‘hot start’ (moving into an existing business rather than starting from scratch), it can take time for the impact of your actions, marketing & efforts to bear fruit. Like a farmer can’t expect a field to transform into wheat immediately, with the right expectations & consistent effort, they will be able to reap a profitable harvest.

Here’s what you can do to minimise your chances of making this mistake:

Be Patient: Understand that building a successful franchise takes time. Set realistic goals and be prepared for the challenges of the startup phase.

Measure Progress: Regularly review your business performance against your goals, and be prepared to make adjustments as needed to stay on track.

The first step in avoiding franchise problems is to know what to expect and to see what your fate could be. At Belvoir Group, we work closely with our estate agent franchise owners to give them the best chances of success that we can: we provide franchisees with a ‘hot start’, ensuring they start by running a business that already has momentum, we provide excellent training, marketing & a dedicated business development manager as well as a team that can help our franchisees get on with growing their business. In order to find out more about how you might undertake the franchise journey with a team to help you, please book a discovery call.

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