7 COMMON MISTAKES TO AVOID WHEN FRANCHISING YOUR BUSINESS

Franchisors often fail to recognise the importance of creating a strong community within their franchise network. It is important to establish a support network within the franchise system that will afford franchisees the opportunity to learn from and support one another, especially during difficult times. Such an infrastructure will be particularly helpful to new franchisees entering the market. A communication system that provides the franchisor with regular feedback on aspects that needs to be improved or implemented, and what is not working at that point in time, is also important. 

Poor selection techniques when selling franchises is another contributing factor to franchisor failure. This could also be related to the greed factor, in cases were franchisors sell franchises indiscriminately to boost their own cash flow situation. Selling franchises is fine, but for the long-term sustainability of the system it pays to be selective when choosing new franchisees. Get your franchisee selection wrong and it won’t be long before disgruntled franchisees quit simply because it was not their cup of tea, and it is certain that when these franchisees speak to others about your franchise, it will not be portrayed positively. There is also the possibility that other franchisees who find themselves on the fence or who are navigating a rough patch will get caught up in negativity generated by these franchisees and will talk themselves into failure. Bear in mind that in franchising, rightly or wrongly, the situation can quite easily devolve into a ‘You vs Them‘ scenario. It is simply the nature of the beast — even though your overall goal is the same, the two entities — franchisors and franchisees — essentially have different aims and ambitions. 

Franchisees return from their initial training enthusiastic about making their mark on the business world, but when situations arise that they are ill-equipped to handle, they are left feeling incompetent and inferior. As they are probably also harbouring doubts about their franchisor, they have no-one to turn to. Unsatisfactory training or an inability to adequately assist them with day-to-day operational matters could lead to a loss of trust and confidence. From here it’s usually just a matter of time before they are lost to the franchise system altogether. 

A lack of new product research and development is another major contributor to franchise failure. It is imperative to keep pace with the changing business environment and to equip franchisees with the tools necessary to compete and stay competitive in the marketplace. 

While it may seem like a contradiction, growing too quickly can be the downfall of even the best franchise system. Some franchises make such rapid inroads when they first appear that the owners begin to believe their system is so good they can maintain the meteoric pace of expansion indefinitely.  

Even with customers pouring in through the doors, purchasing stock to keep up with growing demand and investing in enlarging their facilities or expanding their footprint, will put much pressure on their cash flow.

Franchisors that fail to continuously test and measure the performance of their franchisees often only realise there is a problem when it’s too late. The secret is to have systems in place that measure their performances on a regular and ongoing basis; that way all that is needed is a small tweak here and there to keep them on track. It’s often more efficient and less painful to make a series of small corrections than one large one. It’s also less costly. 

The final reason franchise systems fail is that they neglect to develop meaningful relationships with their franchisees and the result is a breakdown in communication in the true sense of the word. Conflict, when not handled properly or left unresolved, will likely lead to litigation, which no-one really wants.