Franchising is a fantastic strategy for expanding a successful business. However, problems may arise if you franchise your business too soon or if you choose the wrong lead who isn’t a good fit for your brand.
Simply said, these are merely two of the most typical franchisee blunders. In addition, failing to think about which business structure can promote the expansion of your franchise business can lead to the collapse of your franchise.
This article will help you avoid these typical mistakes in franchising and keep your business running smoothly.
5 Mistakes You Can Avoid in Franchising Business in India
Mistake #1: Franchising when your business is not ready to franchise
The most common mistake made by business owners when franchising is to do it too soon. When things are going well financially and you have a consistent stream of revenue coming in, franchising your business may seem like a great idea.
It’s important to wait until your company has reached full maturity before expanding into franchising. When this happens, growth and income for your company slow down.
2 things to look out for to know if your business is mature enough to franchise:
- Has a sound operations system in place, which works well with your business model
- Sufficient capital
There are certain expenses you’ll incur as a franchisor that you should plan for. Expenses like these may include:
- costs associated with having manuals and contracts drafted by attorneys;
- spending money on franchisee training;
- Marketing materials designed to help you expand your business.
These preliminary costs may be recouped from franchisees. However, you will still require a financial investment to launch your franchise.
Apart from sufficient capital, there are a few things to think about before committing to a franchise.
- You need to make sure there’s a sizable market for your company’s wares. Sales volatility during the past few years is a red flag that your business model isn’t quite ready to be franchised.
- It’s also a good idea to think about whether or not any potential investors might be interested in purchasing a stake in your company. Franchises allow other business owners to invest in and operate under the same brand.
- Franchisees are responsible for the day-to-day management of a location, while you benefit from a cut of the revenues and the licensing costs. Potential franchisees may not be interested in signing on the dotted line if they see little to no outside investment interest in your company.
Mistake #2: Proper SOPs
Having thorough and well-written Standard Operating Procedures (SOPs) for every aspect of your business will help ensure that things keep running smoothly even if something goes wrong.
Here are some suggestions for incorporating a SOP into your company’s operations.
Typical examples of standard operating procedures are:
- methods of selection and instruction
- Standards for client care
- Methods of New Product Creation
- Guidelines for Business Procedures
Having documented company SOPs in place can save time and effort in the long run by establishing standards across all locations and clarifying roles and responsibilities for all employees.
Mistake #3: Recruiting inappropriate investors
Franchisees play an important role in promoting your business. This is because a franchisee will promote and sell your company’s products or services under your company’s name.
Therefore, it is important to carefully select franchisees to represent your brand, as the wrong ones could hurt your company’s image.
If you want to find a franchisee who is a good fit for your franchise business, you need to give yourself enough time to implement a comprehensive advertising strategy.
In addition, once you have a pool of applicants to choose from, you need to create selection criteria to evaluate each candidate.
It’s important to ask both franchise-specific and more general questions of potential franchisees during the interview process. A franchisee’s qualifications and expertise in the franchise industry are crucial to the success of a new firm, but other attributes, such as drive and dedication, are just as important.
An extensive interview procedure is preferred by some franchise owners. However, some franchise businesses give prospective owners a taste of what it’s like to work in the field. Thus, the prospective franchisee can experience the franchise in action before committing to it.
Mistake #4: Not having a business plan in place
It is crucial for every business, but especially so for those thinking about franchising, to have a well-thought-out plan for the future.
You may lack the direction to keep your franchise firm on track and secure its success without a well-thought-out business plan.
Contents of the business plan should include:
- Target audience / market
- Marketing strategy
- Financial forecasting
Mistake #5: Without understanding franchising costs
It’s important to receive an exact estimate of the franchising cost when preparing to expand your business into franchises.
And bear in mind that there are other expenses to think about. To properly plan and budget for a company expansion, it is recommended that you seek the advice of professionals in the field.
Examples of franchising costs are:
- License fees
- Inventory costs
- Marketing and advertising expenses
- Insurance costs
Risks of Franchising Your Business in India
Successful business owners often consider franchising as a means of growth. Franchises have pros and cons just like any other company model.
Until you weigh the benefits and drawbacks of franchising in light of your specific business, you cannot say with any certainty whether or not it is the appropriate choice.
In most cases, this calls for the assistance of a franchise advisor or consultant; however, before making contact with these professionals, you should familiarize yourself with the primary benefits and drawbacks of franchising.
Here are some risks of franchising in India.
1. Capital outlay.
Investing a specific sum into a franchise is necessary. There will be outlays for developing the model, writing the operations manual, creating the training manual, drafting the franchise agreement, and beginning marketing, sales, and employee recruitment.
2. Reduced authority over franchisees.
Franchisees are autonomous enterprises, even though your franchise is a well-proven system. Franchisees are not like regular employees in that they can be ordered around.
3. Core community weakness.
Franchisees are far more difficult to motivate than salaried employees to cooperate for the good of the system and the business as a whole.
4. Innovation obstacles.
Franchises make it more difficult to experiment with new ideas than independently owned businesses.
Also Read: Disadvantages of franchising your business in India.
Key Takeaways,
There are several positive outcomes for your company that might result from a franchise agreement. However, if you’re not careful, you can make one of the classic franchising blunders.
If you’re considering franchising your company, it’s important to take these steps first.
- Your company has reached full maturity;
- Your franchise’s expansion can be aided by the legal framework you’ve set up;
- You are careful in selecting the best candidates for your franchise.
FAQs
Q.1. When is the right time to franchise my business in India?
There is no definite moment to turn your business into a franchise. Consult with knowledgeable professionals like franchise consultants if you’re thinking about starting a franchise of your business in India.
Conclusion,
In conclusion, there are a number of typical blunders that entrepreneurs make when they decide to franchise their company.
If you’re considering franchising your business, it’s crucial that you think through these pitfalls so that you can avoid them and put yourself up for success. Get in touch with us at Sparkleminds, to know about how to give a franchise of your business in India.
