6 Common Mistakes Made by Franchise Buyers

Franchising helps you to be your own boss but the buying analysis and decision poses real challenges. You need to analyze several important issues before deciding to purchase a franchise.

If you are planning to buy a franchise business then keep an eye out to avoid some of these common mistakes.

Mistake 1: Blindly Believing Franchisors

As franchisors want to expand their franchise, they tend to market by showcasing how large and popular they are. It is your responsibility to make sure that along with a popular brand, the franchisor should provide you certain important services.

It includes location selection, training, an effective marketing plan, and many more, which helps you stand on your own feet and find success in your franchise business.

Mistake 2: Overlooking Due Diligence

Franchise business opportunities can be assessed using a due diligence process. You can check the financial, operational, and potential challenges of the business.

Take help from your legal and financial advisers to carry out a thorough due diligence process.

Mistake 3: Thinking ‘Bigger is Better’

One of the common mistakes franchisors make is to attempt to grow too quickly by saturating their operating area with franchisees.

But, unless the franchisor is exceptional in marketing, it is not advisable to buy such a franchisee.

Mistake 4: Not Inquiring with Existing Franchisees

If you don’t speak to other franchisees that are operating in your vicinity, then you are losing out on valuable information. These franchisees will be able to provide you the right feedback about the franchisor, which in turn helps in making the right purchasing decision.

With the discussion comes the critical information about the franchisees’ operations, concerns, requirements, issues, etc.

Mistake 5: Forgetting to Analyze Financial Commitments

Before signing the franchise purchasing agreement, it is important to analyze ALL financial commitments. It is a prudent practice to add 10-15 percent to the final figure.

Committing to a franchisee purchase without provisioning for operating expenses is highly risky.

Mistake 6: Following the Crowd

We agree that a ‘Hot’ franchise is a tempting opportunity. But, the purchasing decision must be made not only on the popularity of the franchise but also on your capabilities, and financial resources.

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