Buying a franchise is a great opportunity to go into business for yourself. As you start the process of choosing a franchise, it is important to avoid these seven common mistakes that could be potential pitfalls to your new business.
Buying Into The Hype
Many companies will claim to be the greatest but buying a franchise is a business venture. In business, there is, unfortunately, no such thing as a sure thing. Not all franchises are equal, and not all of them will result in instant or long-term success.
Not Doing Market Research
It is easy to get excited when shopping for a franchise, but do not let that excitement keep you from really digging in and doing the necessary market research. While a franchise make look like a great opportunity at first, it is imminent to know how well your franchise will do in the marketplace.
Choosing the Newest Franchise
For many, the main draw to purchasing a franchise is the fact that you also obtain the brand name and proven record of that company. While the newest franchise might be enticing, investing in an up-an-coming business can be very risky.
Not Having an Emergency Fund
While researching different franchises, you will likely carefully calculate the franchise cost, fees and ongoing royalties but it is important to have an emergency fund in place in case your new business does not start turning a profit as quickly as you expected.
Not Having an Exit Strategy
Understanding the terms of your contract is obviously vital and while you may be focused on what it includes in regards to your business running successfully, it is equally important to know what will happen if your situation takes a more negative turn. You should be informed as to what will happen if you close your business before your contract is up or if your business goes bankrupt. Obviously, you hope these situations do not arise, but being informed will help if they do.
Not Hiring a Franchise Advisor
Buying a franchise is a big financial investment but investing in legal advisors is equally vital to the success of your business. Having a franchise attorney can be extremely helpful as they can help you to understand and negotiate your contract, and show you what to avoid during the process.
Assuming the Franchisor has Your Back
It makes sense that your franchisor will want your business to succeed, but at the end of the day they will protect their own interests first. When it comes to business, it is important to remember that they may not always have your best interest at heart.
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