5 Critical Mistakes to Avoid When Building Your Franchise System
Now that you have thoroughly assessed whether your business is right for franchising – and determined that it is – you will begin thinking about how to grow your franchise system. As with any new endeavor, mistakes will be made, but you will want to minimize the number and severity of blunders. Below are some of the more crucial errors emerging franchisors make and how to avoid them.
Mistake #1: Failure to Establish a Threshold for Unit Economics that will Generate ROI
Franchisee prospects will want to know how much they have to spend to get a unit up and running and when they can expect to see that investment pay off. This is a major building block in the foundation of a healthy franchisor-franchisee relationship. Be sure your existing units deliver those results, factoring in the additional expense of a royalty payment and steeper learning curve for your future franchisees.
You can count on your brand not growing if you do not establish a threshold for unit economics that will generate profits for the franchisee. You can also count on poor franchisee validation and stunted growth if you cannot deliver on their expectations.
Mistake #2: Lack of Support Structure for Franchisees
You want your franchisees to succeed in part because they represent your brand. If you have failing franchise locations, your ability to attract and sell more franchisees will be greatly diminished. Franchisees will struggle if there is not a strong support system in place.
Training should a large part of the support system. Training is a significant part of consistency, which is what consumers expect from a franchise brand. They depend on the product and service being the same at each location. Proper training will help your entire franchise system operate well, not just the single unit owner. The franchisor must offer consistent training to every franchisee. A support structure should also include easy access to corporate management, quick response time to franchisees and an atmosphere of collaboration between franchisees among other things. Determine what kind of support your franchisees will need to succeed and be sure you make the investment up front, not after you have sold your first franchise.
Mistake #3: Recruiting the Wrong Franchisees
In the beginning, it’s tempting to grant a franchise to anyone with enough capital. After all, you’ll be eager to grow the brand and recoup start-up expenses. But, not thoroughly vetting franchisee prospects is risky and could lead to the demise of the brand.
In order to recruit the right franchisees, you must first know what the ideal candidate looks like. Do you want owner-operators or absentee owners? Are you more interested in single unit or multi-unit owners? Consider what type of persona you want representing your brand. Veterans? Millennials? Husband-wife teams? Look at their personal and professional backgrounds, analyze their work ethic and, of course, make sure they are well-funded.
Mistake #4: The Model is Not Replicable
You have to be able to replicate each unit. Remember, consistency is key to delivering on your brand promise and a high level of consumer satisfaction and, therefore, essential for brand expansion. Product, service, operations and more should be the same at the Chicago location as it is at the San Francisco location.
If units operate differently, you will have a hard time establishing brand recognition and instead will have an undisciplined franchise system full of confusion and inefficiencies. Before you start selling franchises, make sure you develop systems that can be easily duplicated at each location by the types of franchisees you will be targeting.
Mistake #5: Absence of a Growth Strategy and Growth Budget
Naturally, you will want to grow the brand quickly. But, you’ll run into trouble if you do not have a plan for growth and the capital to make it happen. You will want to consider how many units you want to open in a certain amount of time, and where. You will budget off of that number accordingly so that you have a realistic investment spend ready to achieve your goals.
Determine where your brand will do well and establish target markets. Do you want to start locally, around your city? Do you want to target your state, a region or the nation? Not only will you have to figure out how much it will cost to grow, but you also have to determine the reach of your supply chain and how far you can provide support and training.
With 30 years of franchising experience and more than 800 franchise owners representing 1,200 locations for five brands, Winmark Franchise Partners can help you avoid these common pitfalls when building your franchise system.
We can help your business expand into a successful franchise by providing the guidance you need. As a franchise consultant and trusted advisor, we have the knowledge and capital to get your brand on the right track. If you are interested in franchise growth, contact us here or at (844) 452-4600.