Blunders happen. They’re part of the human condition. But, some of them are avoidable.
In this article, I’m going to show you 5 blunders that are avoidable when buying a franchise business.
According to Dictionary.com a “blunder” is, “A gross, stupid, or careless mistake.”
(Rather straightforward, eh?)
Here’s my definition: “A Royal screw-up.”
And here’s a fact: It’s important to not screw-up when buying a franchise.
Because if you do end up screwing up, your financial situation could become precarious.
These 5 Franchise Buying Blunders Are Totally Avoidable
Not assessing your financials before you start your franchise search.
When a synapse in your brain decides to allow thoughts of “being your own boss” through, several things happen. Unfortunately, taking a step back to figure out your exact financial situation isn’t one of them.
It’s a good thing that there are plenty of detailed articles around on how to buy a franchise. That’s because the financial aspect of franchise buying is discussed…and some of the articles even point to free net worth calculators that make figuring out your financials as easy as pie.
So before you start spending lots of time searching for a franchise business opportunity, assess your financial situation. That way you’ll know exactly what you have to work with.
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Not having “The Talk.”
They don’t know what you’re thinking about.
They’re not mind-readers.
“They” being your spouse, partner-or whatever the politically-correct word is that I’m supposed to use today.
And, if you’re anything like me, your mind can be a pretty scary* place at times.
(Caricature courtesy of AZRainman)
*Not as scary as Stephen King’s mind, but…
My point is this: If you’re thinking about buying a franchise, if you’re imagining what it would be like to own a thriving business, make sure you have “The Talk” with your significant other before you go all in with your idea.
Please read the article I wrote for the SBA on this very topic, before you talk to your spouse.
Working with a franchise consultant who’s trying to get lucky.
To clarify what I mean when I say “get lucky,” you have to first look at how franchise consultants* get paid.
*In franchising, the word “consultant” usually refers to someone who’s getting paid a (HUGE) commission by a franchisor to place a franchise buyer with their franchise opportunity.
It’s also important to know that some of them refer to themselves as franchise brokers or franchise “coaches.”
Tip: If you’re working with someone who offered to “Help you find the right franchise” for free, that means they’re getting paid by someone else. (Franchisors)
Do you really think that franchise consultants, coaches, and brokers aren’t helping you out of the goodness of their heart.
Recommended read– The truth about franchise coaches
Wait…I almost forgot to tell you what “getting lucky” means from a franchise consultants point of view.
That’s when a consultant will present franchise opportunities (they have contracts with) that probably aren’t a good fit for you-hoping that you’ll end up liking one of them anyway and buy it.
Because if you buy a franchise they’re contracted with, they get paid* a rather generous fee.
*This fee can range anywhere from $15,000 (on the low-end) to $75,000 or more for every franchise sold.
You Need To Do Research On The Consultant
If someone is willing to work with you for free-to help you find a franchise to buy, you should get some background information* on them.
*In this situation, one of the things you can do is a simple Google search of the franchise consultant or coach you’re thinking of working with. See if you can get some facts about him and his reputation. And check to see if he’s written any original high-quality and useful franchise articles. And get references from people that he worked with to find a franchise.
This blunder is really an easy one to avoid. Here’s how:
If you end up working with a franchise “consultant,” make sure you contact and talk with franchisors that are competitors of the franchise opportunities the consultant presented to you.
For example, if a franchise consultant/coach/broker presents a senior care franchise like Homewatch CareGivers, make sure you contact a senior care franchise like this one to compare opportunities. The one you’re not shown may end up being a better franchise for you.
Attending multiple Discovery Days.
You do know what a Discovery Day is, right?
From the Wayback Burgers franchise website:
“Wayback Burgers invites you to a Discovery Day to explore the brand and gain direct information to better understand Wayback Burgers Franchise Opportunity. During the Wayback Burgers Discovery Day, you will also meet the people behind the brand, as well as learn the brand story, our philosophy, mission and vision.”
In a nutshell, a Discovery Day is a meet and greet of sorts.
You, the prospective franchisee, gets to meet the team at franchise headquarters. It’s a wonderful way to get a feel of how the franchise company operates and it’s also your chance to meet the executive team and department heads. I highly recommend spending the money* to travel to franchise headquarters.
*Sometimes, the franchisor offers to pay your way, or to at least reimburse you for your travel expenses-if you sign-on as a franchisee.
If you’re stuck between what you feel are 2-3 great franchise opportunities, don’t attend more than one Discovery Day.
The reason you should only attend one Discovery Day has to do with why you’re going to one in the first place.
Specifically, the only reason you should attend a Discovery Day is to see the operation (and meet the players involved) in-person. It’s not to casually look around and “see” things.
If you’ve read my article on attending a Discovery Day , or my book-or you’ve taken my online franchise course, you know my views on this important topic.
Basically, my feeling is that you should never attend a Discovery Day unless you’re 90% sure you’re going to move forward-pending verification of everything you’ve learned in your research. (Along with an evaluation and look-through of the FDD and franchise agreement from a qualified franchise attorney)
In the end, you need to avoid the blunder of attending multiple Discovery Days. It’s time you could have spent doing other stuff. Other start-up stuff.
If you’d like to see how a Discovery Day works-from the franchisor’s point of view, read this article from my friend, Michael Seid.
This one is special.
Attempting to buy a franchise all by yourself.
Go on-put your arms around that thought for a moment. Then click the link I placed at the end of the next sentence.
For more on avoiding what could end up potentially being a $150,000+ blunder, I encourage you to carefully read every word on this webpage.
Do you know anyone who made blunders in franchising?