Buying into a franchise doesn’t guarantee business success

| Aug 5, 2020 | Franchise Law |

There are many risks involved in starting a new business. Companies require substantial investment and planning, and trying to build a reputation from the ground up is a real challenge. Many new businesses fail early on, leaving their owners dealing with financial losses and the end of a dream.

Buying into a franchise doesn’t guarantee business success

Some entrepreneurs who have financial resources or other assets available to them choose to buy into a franchise instead of building their own brand in order to benefit from large-scale brand recognition and franchise marketing efforts. These people might see a franchises as airtight investments.

They might assume that if the brand that they buy into is successful, their individual franchise will definitely succeed as well. While purchasing a franchise can take a lot of the guesswork out of owning a business, it is still possible for an individual franchise to fail while the parent business continues to thrive, especially if the franchise owner doesn’t have the right support.

Your business is only as good as your staff

Many franchise businesses offer customer service or specific products. Your sales representatives and customer service professionals will be the face of your specific franchise. Bad decisions in hiring and a refusal to address performance issues can impact how people perceive your business and their willingness to spend money there.

You will still have to carefully manage your business and its budget

Buying into a franchise often means that you have an existing customer base ready to start patronizing your business out of pre-existing brand loyalty. While you may expect substantial revenue, bad business decisions, ranging from paying too much rent at a specific property location to spending more than you have available for local marketing could leave your business struggling to stay afloat. No amount of corporate advertising will offset poor management at a local level.

Even people with business experience need support from the parent company

Part of what a franchise offers you as a business owner or entrepreneur is the support that comes from their corporate staff. From assistance with marketing to resources for sourcing supplies, you should take advantage of the support offered by the parent company and ask for help when you need it.

Setting up a local branch of a well-established or growing, popular franchise can be a great business move, but only if you have the skills to run the business and the resources to invest to make it successful. Getting the help you need, including legal and financial advice as you plan your franchise business, will set you up for success.

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