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Tips to Avoid Franchisee Failures

Why Some Franchisees Fail?

It could happen to anyone. You see an ad for a franchise, contact the company and, soon you are a franchisee! All goes well, then one day you realize your franchise business is failing and there is little you know to save it. What could be going wrong?

First of all, examine the business: How is it failing? Knowing what the problem is will help you find the solution. Assess your team’s strengths and weaknesses. Is everyone doing well at his or her role? What could be done differently or better? Once you’ve tried to solve the problem internally but cannot conquer it, ask the help of your franchisor. For example, if the store sales are affected by construction work nearby or new competition, ask if you could move your store to a more viable location. If you planning to be a franchisee, here are some tips that you do well to heed:

Know your strengths and weaknesses. Franchisees need to have skills in handling people, handling money and handling the business. Of course, you can hire people to do these things but you have to possess some level of business acumen to be successful.

Know your reasons. It is not enough to want to make money. You have to believe in the product and the brand, and have a passion for the type of business you are getting into.

Be ready to follow. Franchising is applying a proven system developed by the franchisor. Thus, this system must be followed to a tee for a franchisee to replicate the success of the original business. There is little room for innovation in a franchise system.

Be ready to work. Businesses that are regularly visited, even managed hands on by the franchisee have proven to be more successful. Owners can decide then and there how to adjust rules to make the customer have a better experience.

Choose carefully. Do not get blinded by sales gimmicks. Does the product or service have staying power? Does it fill a need? Also, be suspicious of franchises that can be bought for a song. If the franchisor does not value his brand and system that much, could there be much to it?

Pay attention to numbers. Have an accountant go over the franchisee’s numbers with you. Be wary of those who promise a fast ROI. Make sure the experience of the company can back it up. Also, expenses do not stop at the franchise and investment fee – consider how much it costs to run the store as well as emergency expenses.

Observe the industry. Is the franchise you intend to buy in a growth industry or a sunset industry? Is the brand you intend to franchise a major player? How do you think the industry will develop in the next decade? Remember you are in this for at least five years!

Avoid culture shock. Examine the franchisors’ company culture. Do you have the same values as the company? Remember that you will deal with them on a regular basis. Strained relations will certainly affect how your franchise will perform.

Author: Armando Bartolome of The Manila Times

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