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Five Commandments for New Franchisors

By Patrick J. Maslyn, Franchising

One of the most common — and insightful — questions that we hear from new franchisors is “What are the most common mistakes made by new franchisors?”  It is a great question. Not long ago we sat down and wrote our top 5 New Franchisor Commandments. They are:

  1. Know Thyself. Franchising is a different business than operating a single unit – or even multiple units. You need to understand that the skills that made your business successful do not necessarily mean your franchise system will be successful. Take a hard look at your skill set and the skills that will be needed to succeed as a franchisor. If you don’t have a particular skill, hire someone to help you.
  2. Know Thy Concept. What sets your business apart from others? Why are you successful and others aren’t? If you don’t know the answers to these questions, how do you expect to communicate them to franchisees? And if you cannot communicate them to a franchisee, how do you expect the franchisee to be successful? Step back. Identify your “secret sauce” and the “recipe” that you use to produce it.
  3. Do the Math. Take the time to write a business plan for your franchise system. Use that process to make sure that the franchisee will be able to make a profit – and that YOU will be able to make a profit. Do a proper cash-flow analysis to properly manage expectations. Be conservative.
  4. Don’t Out-kick Your Coverage. Rapid expansion is great, but if you are not prepared to support all of your franchisees, you risk franchisee disillusionment and failure. If you want to grow quickly, have a plan in place to add the necessary support personnel as you grow – and make sure that you’ll have the funds to do it.
  5. Choose Your (First) Franchisees Wisely. The temptation to accept marginally-qualified franchise candidates early on is, apparently, practically irresistible. Even those franchise systems that try very hard to resist that temptation find that they don’t really know who is a good candidate and who is not. Be even more selective early. The first franchisees are the ones who will set the tone for your franchise system and provide validation to new prospects.

The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2019.