Looking to Buy a Franchise - 6 Big Mistakes to Avoid

Article

LOOKING TO BUY A
FRANCHISE?
Six Big Mistakes to Avoid!

by Daren Coudriet

Canadian Franchise Opportunities
www.CAfranchiseOpportunities.com

SIX BIG MISTAKES TO AVOID

So, you’re looking to buy a franchise and you are
wondering where to start. One of the most important
principles you need to adopt is

“learn from the mistakes of others”.

There is no need for you to go into this blind and repeat
someone else’s mistakes.

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Mistake #1: Follow Your Passion
This one may seem strange at first. After all, aren’t you supposed to follow your
passion? Isn't that what everyone’s says, "do what you are passionate about"? Here’s
the twist - passion is great and it is sometimes the only thing that separates you from
failure, but to succeed in business, you need a passion for starting and running
a business.

Here’s an example to help explain - say you have a passion for golf and your friends
and family encourage you to follow your passion. That’s great, but there is a huge
difference between becoming a professional golfer and starting a golf retail store. In
this case, striving to becoming a professional golfer to fulfill your passion for golf
makes perfect sense. On the other hand, starting a golf retail franchise store would be
a recipe for failure. To succeed in running a retail store, you need a passion (and
experience) for retail operations, not golf.

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Mistake #2: Buying the “Hot” Franchise
It’s amazing what crowd mentality (following the herd) can do to a person when
making a decision. It is easy to fall into that trap where you think just because
everyone else is buying it, it must be the right franchise to buy. But you must be
careful to avoid that way of thinking, for a couple of reasons:

1) The franchise could be today’s fad and it may not stand the test of time. You need to
ask yourself, does it have what it takes to be a success 10 years from now?

2) It may be a good fit for others and simply not a good fit for you. It is possible you
do not fit the franchisee success profile and where others succeed, you would fail.
Believe it or not, this is a common problem -- a franchisee evaluates the franchise, but
not themselves.

Take the time to do your homework and choose the right franchise for you.
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Mistake #3: Overestimating the Franchise Model
If you are thinking that you will buy a franchise and simply because it is a franchise it
will be easy to start a business, think again. I have heard franchisees say, “ but I
thought I just had to follow the formula.” Yes, you will likely have to follow the
processes, system and procedures outlined by the franchisor, but succeeding in a
franchise is much more than that - you need to know how to run the business.

While a franchise can help you avoid many mistakes you may have made otherwise,
succeeding in a franchise business can be just a challenging as starting any other
business.

Make sure you have what it takes to succeed in business and the right franchise will
help to improve your chances of success.

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Mistake #4: Underestimating Costs & Capital
When starting a new venture, business owners are often very optimistic, sometimes
too optimistic when it comes to estimating the costs of getting a business up and
running. Often times the capital needed to keep the cash flowing until the business
generates it on its own, is underestimated.

In the planning stage of a business startup, often a business owner tends to over
estimate the success of the business. The result is that they don’t have the liquidity
needed to get them through the first two or three years, the critical startup years, and
the business fails due to lack of capital.

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Mistake #5: Not Conducting Franchise Reviews
This is simply the case of not doing your homework. You can’t simply talk to a
franchisee or two, just to check the task of the list. You have to do more.

You need to not only talk with the franchisees provided by the franchisor, but you
have to do some of you own investigative work and find other franchisees that are not
on the “preferred” list.

Make sure to talk with franchisees that are in areas or own territories of a similar
demographic. Franchise reviews are one of the most important activities you can
do when evaluating a franchise, if you do it right.

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Mistake #6: Lacking Sales & Marketing Skills
So much of a local business’s success today depends on lead generation. The life blood
of any business is the ability to target and secure customers in their local market.

The level of assistance provided by franchisors in the area of local sales and marketing
varies greatly, but at the time of writing this article, it is typically the responsibility of
the franchisee. I fully expect franchisors to begin centralizing this expertise and
offering local marketing services to its franchisees simply because of the specialized
expertise needed. However, you need to evaluate what the franchisor is providing for
you today. This is one of the areas that can make or break your business.

You may have the best product or service, but if customers aren’t finding you and are
choosing your competition over you, it is not going to matter.

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Summary
In summary, when you are ready to buy a franchise, learn from the mistakes of others
and avoid these mistakes:

Following Your Passion
Buying the “Hot” Franchise
Overestimating the Franchise Business Model
Underestimating Costs & Capital
Not Conducting Franchisee Reviews
Lacking Sales & Marketing Skills

Do you homework and do a thorough franchise evaluation to increase your
chances of finding a franchise that is a good fit for you.

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Looking to Buy a Franchise - 6 Big Mistakes to Avoid

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Looking to Buy a Franchise - 6 Big Mistakes to Avoid