Many people’s dream is to run their own business – to hone in on a passion and let the world know. One way to accomplish this, is to start a franchise.
There are dozens of do’s and don’ts when it comes to starting a franchise. In this blog, let’s focus on some of the major mistakes to avoid.
Failing to get the current financing
Securing financing for a franchise is more complicated than getting a mortgage for a home loan. Timing is often a factor when starting a business, so this is one step that should be thought out well in advance. Those that don’t prepare for this tenuous process can fall victim to accepting unsavory terms, which hurts them in the long run.
For those who are buying a franchise from a newer concept, banks will often ask for a minimum 30% down payment. There are also loans specialized for entrepreneurs that you could consider pursuing.
Failing to engage with your franchiser
Your franchiser has been there-and-done that successfully. Be in ample contact with them as you ramp up your business and learn the tricks of the trade. Most franchisers offer grand opening support, as well as help with your marketing endeavors.
Having no backup plan for capital
Many businesses run out of money or go into the red because they underestimate the costs and overhead of running the franchise. When you pursue opening a franchise, it’s best to have a source of capital in your back pocket if your first round of funds runs dry.
Following your own system
Follow the entire franchise system. It’s a proven track record of success. If it didn’t work, this franchise wouldn’t be around for you to buy in the first place. Innovation is always welcomed, but trust and follow the guidance of those that have been in your shoes and succeeded.
Failing to hire a lawyer when purchasing your franchise
A lawyer specialized in business and franchise law is an invaluable source of knowledge and experience to ensure your purchase runs smooth. All franchise purchases are accompanied by a Franchise Disclosure Document (FDD.) Review this and then have your lawyer review it. Your lawyer will be able to point out any discrepancies or red flags that would be unbeneficial to your purchase.