Common Mistakes to Avoid When Franchising Your Business | Internicola Law Firm

Mistakes to Avoid When Franchising Your Business

Avoid These Mistakes

If you would like to franchise your business or are about to franchise your business, then this is an important article to read. In addition to being a franchise lawyer for over 20 years, I am also a franchisor and I can tell you that while we will all make mistakes as entrepreneurs, that there are certain franchising mistakes that come up far too often and need to be avoided. The mistakes have a lot to do with a misunderstanding about what it means to franchise your business and a failure to engage in a franchise development process focused on specific, realistic and attainable franchise launch goals.

So, what are these mistakes?

Mistake Number 1 – You Confuse Franchising Your Business With Preparing Your FDD

To be certain, the preparation of your FDD is a critical step in the development of a franchise system. Too often though start-up franchisors believe that preparing and having a FDD is what turns their business into a franchise system. Typically, these start-up franchisors will attempt to copy a competitor’s FDD or resort to services of certain franchise lawyers and franchise developers who are intent on selling them on a franchising process that is all about forms. The end result is an FDD that does not meet the needs of your new franchise system and a failed franchise development process that leads to wasted dollars and no franchise results. I have personally found that there is an entire industry (I call them franchise vultures) out there that prey on start-up franchisors and the goal of selling hopeful franchisors on services that place form over substance and strategy. These start-up franchisors are left with worthless forms, bad information and are left on a franchise playing field without the proper equipment and plan of attack. These start-up franchisors are left with the statement of: “…I have my FDD but I haven’t sold and don’t know the next steps…

How to Avoid Mistake Number 1? – Understand that franchise success is all about executing a focused franchise development process and strategy. Your FDD is only one step in the franchise development process and the value of your FDD has so much more to do with the thought process that goes into its development and the overall strategy and plan that is put in place to create a successful franchise system. Learn more about How to Franchise Your Business and the franchise goals that you should be focused on during the franchise development process.

Mistake Number 2 – You’re Not Ready to Franchise

Not every business is franchisable and if your business is franchisable sometimes you may not be ready. This mistake comes up from a misunderstanding of the franchise development process and a failure to work with your franchise development team in properly evaluating your business and properly assessing current and potential competitors in the franchising marketplace.

How to Avoid Mistake Number 2? Understand that in franchising it is not always the franchisor that has the best product or best service that wins but, rather, it is the franchisor with the best execution. When franchising your business it is important to evaluate the strengths and weaknesses of your business, the franchise goals that you want to achieve and whether or not you will be committed to a long-term execution plan focused on franchise sales and franchise system development. To assessable the franchisability read Is Your Business Franchisable and Are You Ready to Franchise Your Business.

Mistake Number 3 – You’re Undercapitalized

This mistake applies in franchising and to all businesses. Too many start-up franchisors misunderstand the franchise development process as having their FDD prepared (Mistake Number 1) and, as a result fail to properly plan out a budget for both the development process and post-launch franchise sales process. Without the right budget, plan and expectations, you will be left with a legal document title FDD and not much more.

How to Avoid Mistake Number 3? You need to plan your budgeting needs for both the development and the post-launch process. The good news is that franchising is entirely scalable and you could roll out a franchise system slowly. However, you must have the right plan in place and a strategy for the next 1 year, 2 years, 4 years and 5 years. To learn more about the real costs, read How Much Does it Cost to Franchise your Business.

When it comes to franchising the good news is that it works. The even better news is that franchising is entirely scalable and franchise success for one person may be achieved with 5, 10, or 25 franchise sales while success for others may come in the one hundreds. If franchising is right for you then your need to be in it to win and to achieve tangible and realistic franchise development and franchise launch goals. There are no short cuts but there is definitely a formula and step-by-step process for franchise success.

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