When the economy is struggling, franchising often grows in popularity, as industrious people turn to tested principles to pursue their ambitions – while minimizing the risk to their capital. Nonetheless, all entrepreneurs will tell you that franchise opportunities are far from a license to print money. Here are some of the more common obstacles you are likely to encounter if you decide to follow this business model:
Many people have unrealistic expectations about the profits they can make. Generally, once people start running a franchise operation, they find that it is more difficult than they thought. Lots of people purchase a franchise in the hope that it will quickly turn a profit – citing the growth of other sister companies. However, investing in a franchise opportunity is no different than any other form of speculative investment. It demands considerable time and effort before any success is achieved.
Franchisees often complain that the business venture stunts their creativity. Entrepreneurs tend to be creative souls, so this is a major sticking point for some. Franchisees are given standard tools and processes that they must comply with, so there can be less leeway for trying innovative, groundbreaking methods or ideas.
The risks associated with owning a franchise are problematic for many people. Although the risks might be lower than running a traditional business, they still exist. The product you are selling might be excellent, but this does not guarantee your success. Nor does it necessarily protect your business from outside threats, like new competitors or an economic downturn. You may find that a competitor appears, who can adapt better to the evolving needs of the market. Another risk faced by both franchisees and franchisors is brand devaluation. If the brand receives some bad PR, it will substantially reduce the advantages of running a related franchise.
Franchises are fairly expensive. All franchises for sale have to be bought with cash up front. Funds are also needed for the recurring license fees usually associated with revenue. Moreover, franchisors will typically control the training, equipment, suppliers, and in many cases, the rent as well. Because franchisors determine most of the operator’s overheads and there are no competitors to push prices down, franchisees tend to be left with modest profit margins.
To deal with these challenges, franchisees should base their business decisions on the brand’s requirements. Tactics that may be effective for a clothing store might not be so good for a fast food outlet, for example. While your brand is bound to have some public recognition, you will still have to boost your visibility with your local customers because of other similar businesses already in existence. The relevant issues here mainly center on your personal advertising methods and tactics.
Just like the difficulties you will encounter with increasing your visibility, you also have to set up an effective channel of communication where clients or customers can get in touch with you. This is especially true if you run a service-oriented business. When considering what kind of business to purchase, you should carefully assess the franchises for sale in your area. By doing this, you will identify scope for future growth. Ultimately, it is vital to understand that obstacles are unavoidable – however, you can develop the ability to deal with them over time if you learn from your own mistakes.