What Aspiring Franchise Owners Need To Know

I have shared many seminars and workshops on franchising, and I have noticed how the attendees increase each time. Indeed, it is a good sign that many individuals find franchising a sustainable means of living. And why not? There are so many advantages of choosing to start your own franchise business, such as:

      1.  Starting a franchise business lessens your worries about knowing the name. Naturally, only individuals understand that a particular company is profitable when they see it in every place possible.

      2.  A franchise offers its franchisees ownership supported by significant business benefits.

      3.  An individual who wants to start a business doesn’t really need to have business experience to run a franchise since franchisors provide the necessary training required to operate the business.

      4.  Knowing that a business is a franchise business, it definitely has a higher success rate than start-up businesses.

      5.  Owning a franchise business may cost less than starting up your own business. Again, since the company is franchised, you don’t need to worry about the equipment and the products to see as the franchisors will provide them to you.

      6.  Franchises often have made a name for themselves through having a good reputation and image along with proven management and work practices and ongoing support,

Risks Often Faced by Franchisees

The advantages are just so encouraging. But before you finally decide to start your own franchise business, be sure that you are aware of the following to avoid going through some legal battles in the end.

Not understanding what is written on the contract. Usually, a franchising contract would mean having to go through some pages. It clearly stated what the franchise business is about and how a franchisor should manage it. In a franchise business, it is expected that all franchisees would only be providing precisely the same kind of products to maintain their quality. Some of the mistakes that franchisees commit are using products that are not used or approved by the franchisor.

Another common mistake is using a billboard or signboard far from the franchisor and other franchisees. A particular business’s image has to be the same across all franchisees. Unless the franchisor has agreed to a “facelift” to some extent to blend in on a specific location. It is okay for as long as both parties have approved it.

The people that work for a business are, of course, vital. Therefore, you need to ensure that you bring the right people on board. A company could not survive without the help of people to do specific jobs. However, the people who work for a business must understand how the industry works. This is why franchisors provide training to ensure that the employees are fully aware of their responsibilities.

Additionally, bear in mind that although you have franchised business, it does not mean that you can operate anytime you want. You have to secure your own business permit. The business permit that the franchisor has is only suitable for the operation of the business. All franchisees need to have their own business permit secured from the Department of Trade and Industry and other licenses required when starting a business.

A franchisor must also ensure proper documentation of everyday sales in any kind of business. This is not just to help you realize how much you are selling in a day but, more importantly, to determine if all the “ins and outs” of your products are balanced. Let’s face it. Sometimes, some employees do take advantage. Some would report selling about just ½ of the total sales. With these discrepancies, you might have a problem balancing your books.

The reputational damage of a franchise may leave a scar across all franchisees. And with that, the business may suffer. However, there are two types of consumers- the consumer who would instantly stay away from that business. The other consumer may become a little curious and want to honestly know if the franchise can still uphold its promise to the public.

The franchise agreement also indicates the options of a franchisee should they wish to terminate the relationship. You, as a franchisor, should be able to weigh which among the options suits you best. It is unlikely that every franchisor would offer to take over the franchise business. Therefore, it may leave you the chance to sell the franchise to another individual.  

Remember that if you wish to sell to another individual, you should also inform the franchisor about it.

Being in a franchise business may allow you to have the independence to run a small company with the franchisor’s help. However, it is the right of every franchisor to know every step you plan to take. This way, you will avoid having legal battles in the future.

The biggest problem that any franchisee may encounter is the lack of support. I know one business that just allowed its franchisees to do whatever they wanted. Although it may seem to be a “relaxed” situation on the part of the franchisee, the problem starts when the franchisee intends to seek support, particularly when it comes to marketing and pricing of products. Since the contract/agreement states that the franchisee should stick to the kind of products to be used. And offer their services at the same rate; sometimes, the price set of services/products may not be competitive at a particular location.

Being unhappy with the business you have started would make you think twice if you would continue or just finally hand over the towel. However, one thing that you should not forget – being an entrepreneur means you need to face many risks. It is up to you to allow yourself to be defeated or take it as a challenge and aspire to become a better entrepreneur.

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You may contact Armando “Butz” Bartolome for questions and more information.

By email: aob@gmb.ph

FB Page: Armando Bartolome

Linkedin: https://www.linkedin.com/in/franguru/ 

Website: https://www.gmb.ph