THREE MISTAKES in Getting A Franchise

 

 

The other day while watching a popular telenovela, I saw a string of commercials of various businesses. I must have lost count of the number. However, the two words “Now Franchising.”

In the mid-nineties, seldom would anyone hear those words spoken or advertised. There was just a handful, and most were on the expensive side.

Today, there are more and more businesses that are using franchising as a means of expansion. Approximately there is now 2000 plus from various kinds of food and retail services. It is nice to know the growth of this sector.

I met several people who narrated the bitter lessons experienced in investing in a franchise business with many choices.

Let me share the top 3 mistakes when investing in a franchise.

1. The investment is so cheap…… frequently that people are lured into investing in affordable franchises. The temptation is more on the price with nice pictures. Given this assumption and the amount, one can easily fall prey. The problem is compounded by the sweet talk by the salesperson. The investment covers the amount a person may need to set up, including the permits and other amounts required to start the business.

Thus, the franchise’s investment may refer only to the business per se but not totality. The person must also verify and do a projected financial return. If the amount of the franchise is cheap, a question must be, why so reasonable? How competitive is this? Last but not least, get hold of the list of franchisees and check on their experiences. Chances there may be many undiscovered questions.

2. Great product But wrong location.The formula for success includes the product and the place in any business. I was approached by an OFW (Overseas Filipino Worker) who happened to get a franchise of a well-known food brand. I personally knew and liked the products way back when I was in the Middle East. Unfortunately, the person signed up for a newly built mall. His mistake was he failed to consider the target market of his franchise vis-à-vis the mall. On weekdays hardly were their people with excellent purchasing power. It was only on weekends and holidays sales were much better.  In most franchise businesses, the franchisor encourages the franchise applicant to study and be convinced of the location’s potential. Both parties conduct an independent study. This is highly advisable as both parties address issues and expectations. An analysis does not just cover a period of 1 to 2 days but at least a week or two. The franchisor has a template for the other party to follow.

   3. The franchise has no support…By the definition of Franchising, it means To Be In Business For Yourself But Not By Yourself. It follows there is somebody who will be there to provide support. A young couple invested an incredible amount for a foreign franchise. There was a strong potential, and the location was in the right spot in Global City. Indeed it is where their identified target customers go and frequent. The store began operations and had a soft opening. The customers start to come in as the brand is well-known in other countries. However, the couple started to expect support from the franchisor. This came in when they realized the kind of training necessary for the staff and the kitchen preparations. Only a foreign chef was assigned to handle the food preparation. However, nothing was given as to the management and training of staff. The couple with no food background relied on the experiences of the hired staff. Unfortunately, the team came from different companies and business concepts. The franchisor has yet to provide on loan a management manual. The couple, tired and stressed, demanded much-needed support from the franchisor.        

The couple’s experience could have been prevented if, in the beginning, they had sought the guidance of professionals. Assuming is always a dangerous step. Always ask what covers the support, including the frequency of visits. I recalled a popular resort and casino where top management fired the group’s general manager. The honcho was dissatisfied with the performance and remised of what was initially agreed upon.

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

Email: [email protected]

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