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Mistakes to Avoid When Launching a Franchise Business

Written on January 28th, 2008 by Joseph in brandEXPANSION News.

People choose franchising while starting a small business for several reasons. Chief among them is that it has a very low risk factor. Every decision you take while initiating your business may not turn out to be right; sometimes it may cost you dearly. But with franchising, you get a list of do’s and don’ts that can prevent you from going the same way. The franchisors made mistakes while they were starting out and learned from it. Now, they will impart their knowledge to you through the training manuals and other instructions. Still, you may make certain mistakes; but if you want to avoid all possible blunders, read the following sections very carefully:

• Follow the instructions of the franchisor The franchisor will give you a comprehensive list of things to be done before you open your store. One major thing among them will be the amount of advertisement you are required to make. Follow that list to every single detail. Many a time, you will find sales persons from your local paper/TV/radio/direct mail/yellow pages coming to you with grand suggestions. They will try to impress you by saying that their marketing plan is better than the one the franchisor has envisioned for you. If you fall in that trap and veer away from the path that was drawn for you, you will be making a very costly mistake!

• Hire as you grow The franchisor will give you detailed instructions on what should be your HR policy. If it is not a service-based franchise (which needs a fixed number of employees to start with), then hire as few people as possible. If you are wondering what will be their pay scale, again turn to franchisor’s manual for help. If you overpay your employees, it will quickly eat into your profits.

• Inventory and Supply: Another expenditure that can be avoided with little oversight. It is necessary to have an initial inventory; the franchisor will guide you regarding what should be in it and what not. That can further be reduced by discussing with already-established franchisees from similar locations. Ask them whether any item from the inventory list can be removed or replaced, as any change can lead to reduced expenditure.

• Business Equipment: Again another area where cost can be reduced considerably. Whether you are buying ovens or tanning beds, make sure you check out the rates of different suppliers before settling on anyone. In some areas, used equipments are as good as new. In that case, source them from second-hand dealers and save a bundle. SBA loans can be used in buying equipments as well, so don’t forget to decide on them.

• Find the right contractor: When you buy or lease a location, you are supposed to do some renovation works. Just going for any contractors may prove to be a costly decision; so opt for competitive bidding and take in only the best. Both time and money are to be considered before you choose the contractor.

• Negotiate really well on the lease term: Nothing pushes up the expenditure like rent does. So, try to negotiate as low as you can on the base-rent. Besides the base-rent, there will be common area-maintenance charges and taxes – two factors often overlooked while calculating the cost of running an establishment. Hence, try to find the best lease agreement you can.

Contact brandEXPANSION for more help in launching your franchise.