05.23.2024 - Articles

Avoiding Common Pitfalls: Essential Tips for New Franchisees

Franchising has emerged as a popular path to business ownership, offering the advantages of established brand recognition, a proven business model, and built-in support and training. The International Franchise Association’s 2024 Economic Report projects the opening of over 15,000 new franchises in the U.S. this year, pushing the total to 821,000 units. Despite these promising figures, success is not guaranteed, and new franchisees must navigate a series of challenges to thrive.

The Importance of Strategic Partnerships

Morrow Hill's own Ian Laskowski highlights a critical factor in franchise success: partnering with the right vendors. “One of the biggest mistakes a new franchisee can make is failing to partner with the proper vendors to support their new endeavor. These partners should be experts in their respective fields and will provide the direction essential for long-term success and growth,” he advises. 

Expert Advice on Avoiding Common Mistakes

To help new franchisees avoid common pitfalls, we’ve gathered insights from several franchise experts. Their advice covers financial readiness, strategic partnerships, and the importance of adhering to proven systems.

“The biggest mistakes new franchisees make are being undercapitalized and not utilizing professional services (such as attorneys and accountants) to help them in the business planning process. They should always work with franchise consultants for good direction to establish their business and ensure they have all the tools in place to be successful." - Ralph Yarusso, Atticus Franchise Consulting

“New franchisees often underestimate the expenses of starting a franchise and miss the importance of marketing it.” - Melissa Salyer, First Choice Business Brokers 

“New franchisees often don’t do their research, don’t follow the system, and buy into a franchise undercapitalized.” - Chip Baranowski, Green Home Solutions 

“The top three most common mistakes I’ve seen new franchisees make are: 1. Overlooking their ‘why’ and whether the franchise brand aligns with it. 2. Not securing enough capital for ongoing operations post-opening. (Most secure capital for three months, but six months is more realistic.) 3. Focusing too early on labor and food costs, before truly building a strong foundation of people and providing enough training to consistently deliver your brand experience.” - Kendall Ware, Walk-On’s Sports Bistreaux

“New franchisees (and even new franchisors) make the mistake of not mastering business professionalism. They depend on the franchise system to do it all! They think they bought a turnkey system that guarantees success. It doesn’t do it all. It doesn’t read the profit and loss statements or hire, manage and fire employees, etc. Those lacking business skills are more likely to fail.” - Dr. John Hayes, Titus Center for Franchising at Palm Beach Atlantic University

“The biggest mistakes I see new franchisees make are: 1) Trying to innovate before they’ve imitated. This means that they challenge or question the system before they fully understand it. While this gives them a perceived sense of control over their business, in reality the systems are what they have paid so much money for. 2) A general lack of focus on what drives the business forward the most. I see so many franchisees focus on the color of the brochure instead of engaging in their community to drive revenue. It’s wild. My recommendation for anyone who is deciding to buy into a franchise is to focus diligently on following the system they paid for.” - Aaron Harper, Rolling Suds

Conclusion

Franchise ownership offers numerous benefits but also comes with its own set of challenges. New franchisees can increase their chances of success by partnering with the right vendors, securing adequate capital, and diligently following the franchisor’s proven systems. By learning from the experiences of established experts in the field, prospective franchise owners can navigate their first year with greater confidence and effectiveness. For a deeper dive into these insights, read the full article on FranchiseWire: https://www.franchisewire.com/...

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