Franchisor Mistakes: How to Avoid Making Them

Most first-time franchisors are unable to turn their independent businesses into successful franchise businesses. Much of the time, this is because of franchisor mistakes that they make along the way. To avoid falling into the same trap, you should tread carefully during the planning and implementation stages of franchising.

One of the significant franchisor mistakes that franchising experts describe is that of inadequate planning. Some franchisors fail to do their homework before making important decisions about the running of their franchise companies. For instance, they may fail to accurately calculate just how much money they will need to get the franchising show on the road. Various expenses come into play at many stages in the process. They include legal fees, fees for developing and producing marketing materials, and various other expenses associated with developing the franchise organization.

Other aspects of planning go into franchising. They include decisions about the fees and royalties that the franchisees will pay the franchisor.  Determining what to charge your franchisees is not a decision that you should make on a whim. You have to figure out how much money you will need your franchisees to pay you in fees and royalties in order for you to meet all your financial obligations and to succeed as a franchisor. If the figures you come up with are too low then you could easily end up losing millions of dollars in potential revenue. These losses could ultimately cost you your franchise business. Thus, neglecting to devote adequate time and effort to the different terms of your relationship with your franchisees could result in a number of franchisor mistakes.

 

Franchisor mistakes that antagonize franchisees

 

Among the major franchisor mistakes is one involving failure on the part of the franchisor to recognize that certain business decisions will set him or her at loggerheads with the franchisees. The aim of franchising is ultimately to make money. Any decisions made by the franchisor with the intention of increasing his revenue are not going to go down well with the franchisees if they require some losses on their part. You should keep this in mind as you go about the daily operations of your franchise.

You should recognize that there is potential for conflict between you and your franchisees and make an effort to minimize that conflict by laying the terms of your franchise business out clearly right from the beginning. You should also have in place provisions for conflict resolution and, in the worst case scenario, for terminating dysfunctional franchisor-franchisee relationships. Last but not least, you must realize that one of the keys to franchising success is nurturing your franchisees and ensuring that they succeed. If your sole agenda is to reap profits by fleecing your franchisees, you will only succeed in antagonizing them and undermining your entire franchise system. If, however, you create an environment in which they can thrive, you will ultimately reap the monetary rewards.

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