Franchise Articles

Posted on Jan 05, 2011

Want to Buy a Franchise? Avoid These Costly Mistakes

It usually takes a lot of money to buy a franchise, and you certainly don't want to waste any. Check this list of 7 costly mistakes to avoid before purchasing a franchise.

1. Letting emotions rule. Falling in love with a franchise concept is a common mistake. Don't let your emotions guide your decisions. Use your head, do your due diligence and take the time to thoroughly investigate the franchisor's offering.

2. No professional team. Don't try to do your own financials, contract reviews, or negotiating. The cost of professional franchise attorneys, accountants, and advisors is money well spent.

3. Too little cash. Lack of capital is the number one reason franchisees fail. Item 7 in the FDD will tell you how much money you'll need with a low and high range. Be smart-go with the high range. Then ask current franchisees if the numbers are high enough.

4. Penny wise and pound foolish. Choosing one franchise over another because the initial franchisee fees are lower is shortsighted. It assumes that all franchises are alike and nothing could be further from the truth. Choose the franchise with the proven concept and strongest track record.

5. Too much help. Payroll is the biggest part of overhead for most franchise businesses. New franchisees often hire too many people or pay too much in wages. A good franchisor will provide a good staffing plan. Stick to the plan.

6. No comparison. Never buy expensive equipment, supplies or inventory without shopping around first. Even if your franchisor offers group purchasing, do your own research, shop as many vendors as you can, consider aftermarket suppliers, and weigh different financing options (loans or leases).

7. Marketing blunders. As a new business owner, you're going to be targeted by every ad salesperson around. Ignore them. Follow your franchisor's marketing plan to the letter to avoid wasting thousands.

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