Common Mistakes Committed by Franchisees that Lead to Failure

Franchising is one of the strategies for an Entrepreneur to consider if he or she is starting up a business. But if you have lack of knowledge about this, you may end up caught in the trap of failure. In this article we will be pointing out nine (9) common mistakes committed by franchisees that lead to failure. These are the following:

Mistake number 1. They have chosen the wrong Franchisor. There are hundreds or even thousands of businesses that are now offering franchising as means of expansion strategy. Even newly established businesses jumped into this method just to be aggressive enough and build the brand for a short period of time. The real reason on going into franchise is that if a certain company decides to offer franchise to the public it should build a reputation and brand image first. Also, it should prove that this brand can survive for a long period of time. Most important is that it furnished an SOP (Standard Operating Procedure) that is proven to be effective. Any franchisee who has chosen franchisors that did not meet the criteria mentioned is most likely to fall down.

Mistake number 2. The business is no match with their dream business and expertise. Though the franchisee is free to choose on what company or business he will likely to franchise with, one can also lead to failure if he realized that the business entered is no match with his dream business and expertise. They become confused all along and eventually lost their interest to continue operating their franchise.

Mistake number 3. They are aggressive at first but become passive all along the way. There many reasons why this has to happen. Factors involved maybe, from the very start, projected sales was not met, sales is going down as time goes by, the cost on operating is increasing while sales has no improvement and the like.

Mistake number 4. They did not follow the Company's SOP (Standard Operating Procedure). If the franchisee has chosen a company with proven effective SOPs but did not follow what has been taught to them, then there is great probability that the franchise will fail.

Mistake number 5. They violated the contract or franchise agreement. Actually, not following the SOP is just part of violating the franchise agreement. Direct violation of the franchise agreement or contract leads to termination of the franchise operation. Remember franchising is a privilege given to the franchise applicant to use all valuable procedure on running the business operations including using the company's trademark or brand.

Mistake number 6. They have chosen the wrong business partner to operate their franchise. Internally, some franchisees chose their franchise partner first before actually applying for a franchise. Sometime failure in establishing good relationship including professionalism with the partners results to downfall of the business.

Mistake number 7. They did not monitor their franchise operation as 'hands on' Entrepreneur. Theft and pilferage maybe committed by front liners or employees at the maximum level if they see that their boss is not monitoring them. Frequent monitoring of the business and making the employees aware that you know all strategies, procedures and skills on running the franchise may lessen the chance or even eliminate pilferage committed by employees.

Mistake number 8. They violated the General Accounting Principles. This has been committed mostly by neophyte entrepreneurs where in they have no idea that the business should be considered as separate entity and there are personal expenses that should not be included in the statement of accounts. Example, the expense on gasoline or fuel for their luxury cars should not be deducted from sales of the franchise especially if this is for personal used.

Mistake number 9. They simply abandon their existing franchise in exchange for having a much bigger business. Some franchisees who have the capacity to apply for a franchise to other companies tend to abandon their smaller franchise business and prioritize their bigger project. In this case, they ended up not to renew the franchise though it generates positive income. Maybe such franchisee lacks time management or has no other partner who can operate the existing franchise.

Now we know some reasons why the Franchise may not be successful. In my next article I will be providing some tips on how to succeed in Franchise so please subscribe to this blog or visit www.freebrightideas.blogspot.com most often.