Franchising is a tough business, especially if you’re new to the industry and you only have the funds to give it one good shot. And frankly, that’s an awful lot of people. The typical new franchisee is a middle-aged person with some savings, but not enough to easily recover if the franchise doesn’t work out. On one hand, this does have its benefits. When you need something to work, you’re all in. There’s no doubt, you just move forward and do what needs to be done because that’s your only option. On the other hand, this kind of do-or-die situation creates a lot of irrational emotional responses, both before and after the purchase.
This article on Forbes does a great job of talking about the mistakes we see over and over again from new franchisees. Number 2 is one of the big ones: “Don’t buy a franchise to ‘be your own boss’ or ‘control your destiny’.” A lot of franchises and industry publications go on and on about being your own boss, but what they really want is a heavily invested store manager. When you buy into a franchise, you’re buying into someone else’s system, for better or for worse. If you want to call all the shots, you need to create your own business from scratch. Many people appreciate the guidance, but I always hate to see someone who has purchased a franchise in hopes of running things in their own way.
Number 5 is another big one – “Seek out franchisee complaints online”. I can’t second this enough. Not only do you need to look, but you need to go way beyond the first page of search engine results. There’s an entire field called “Online Reputation Management” where people are hired to use a variety of tactics to push negative things off the first few pages of search engine results. Given the value of each new franchise sold, franchisors have a very strong incentive to hire these firms to cover up bad reviews. When you’re doing your research, check all the major industry sites and use a variety of search terms to hunt down those negative experiences. It might just save your retirement.
If you’re considering a franchise purchase, definitely read the entire article at Forbes and take it to heart. If you have any other tips for potential franchisees, feel free to leave them in the comments!