Owning a franchise is a way to financial independence that many Americans dream about. Much more cost-effective than building your own brand from the ground up, franchising can also help people with limited funds for a new company get going.
When you open a new franchise though, there are a lot of things you can do wrong. Use this guide to learn the most common franchise mistakes people make and how you can keep them from ruining your new business venture before it even gets off the ground.
Starting Cash Poor
Starting any kind of business requires capital, and building a franchise is no different. What is different is the fact that most people can get into a franchise for a set amount of money dictated by the home office. That doesn’t mean that you’re then set and the money will start rolling in.
In fact, you’re going to have to pay employees, keep the lights on and handle outside suppliers that may not be part of your deal with the home franchise. All of this can cost you and if you’re running on a shoestring, it could be the end of your business before it really gets started.
Determine your operating costs for the year and make sure you’ve got enough to stay afloat even if you don’t turn a profit for a while.
Not Hiring a Lawyer
Most franchise contracts are relatively standard, especially when it comes to big companies. For you though, standard doesn’t really mean anything since you’ve never owned a franchise before.
Hire an outside lawyer with franchise experience to look over your contract before you sign it. You don’t want any legally binding surprises coming your way down the road.
Buying into a franchise with name recognition can be smart, but that doesn’t mean that you’re going to make money hand over fist from day one. Unfortunately, a lot of franchise owners feel this way.
When you open a new business, even if it’s a new location of an existing business as is often the case with a franchise, you can’t expect to rake in money right away. It can take three to five years for any business to be in the black, so get prepared or stay away from franchise ownership.
Owning a franchise can be a wonderful way to build your own company under a familiar umbrella, but it isn’t everything people make it out to be. Do your homework and make sure buying a franchise is right for you before you take the leap.
It could be the smartest move of your career or the end of your financial freedom if you play your cards wrong.