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Operating a Successful Franchise: Not as Easy as it May Seem

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New franchisees should recognize that operating a successful and profitable franchise is never quite as easy as it may appear. Despite the numerous anecdotes about successful franchisees, success often requires hard work and recognition of your limitations.

Iíve seen my share of franchisee failures over the course of thirty plus years in the franchise industry. Some of these were attributable to flawed franchise programs, however, some were the result of franchisees not recognizing just how difficult it can be to launch and operate a new business whether itís a franchise or independent operation. The responsibility for this situation can be shared by franchisors that overly hype their franchise opportunity and franchisees who fail to perform adequate due diligence and critical self analysis.

Before presenting my comments letís assume that the franchise has a successful track record and is not a start-up. (If youíre dealing with a start-up see my previous article on evaluating start-up franchises.)

Secondly, weíll assume that the franchise candidate meets the financial profile and investment requirements for the specific franchise.

Although a franchise is based upon a successful business model and existing brand recognition, there are certain franchises that I would call a true winner. In this category, are the franchise concepts that have a highly successful track record like McDonalds, KFCís, Subway, 7-11 and Panera Bread to name a few.

In many cases the lower the franchisee investment the more success will directly depend upon the hard work, efforts and ability of the franchisee.  For example, consider franchises that require an investment below 100K. In the majority of these cases the franchisee will be expected, to generate sales and new customer accounts. This requires particular selling skills and a good deal of effort. It means that a franchisee may need to work more hours than they expected if they are to be successful. However, this challenge is not exclusive to low investment franchises. If a franchisee doesnít have the skills that match the operational requirements of the franchise it could require long days and hours to be successful. Yet even with the proper skills a franchisee may need to work long hours.

Individuals that are considering the purchase of a franchise need to fully understand what it will take to be successful. Here are some ways to make that determination:

  • Unless your franchise is a ďWinningĒ franchises be sure your skills match the requirements needed to successfully operate the franchise. There are lots of successful franchise programs but you need to exercise proper due diligence to identify the right ones. Donít be over confident but rather take a critical look at what operating the franchise requires.
  • Know what business skills are required to operate the franchise, be sure you have these skills.
  • Confirm what it takes to be successful by asking existing franchisees. Donít forget to contact some franchisees that have terminated their franchise. You may learn a lot more than you think. Most importantly inquire about how long and what it took before the franchisees reached break-even.
  • Have the resources to hire adequate staff. A new franchisee that is operating with limited working capital may not be able to afford hiring the right amount of staff. This can mean long hours and ultimately frustration.

People looking to purchase a franchise can get caught up in the hype of owning and operating their own business. However, without the proper knowledge, skills and resources the result could be long days with limited success. Above all, avoid buying a franchise that will become just another job.

© 2011 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at franchiseknowhow@gmail.com

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