Who is not familiar with the franchise business? This business has grown since 1731 in Charleston, South Carolina. A franchise is a business bond in which parties are given the freedom to exercise rights in the supply and use of goods or services owned by other parties.
The franchisor is also called the franchisor, and the recipient is called the franchise. Franchise business is often done by exchanging money with agreements to run a business related in a certain period.
This business is a reasonably reasonable business opportunity, especially for all of you beginner business people. However, even starting a newbie friendly business does not mean anti-failure. Of course, this business also has a risk of failure that is not small. Curious about the cause of this franchise business failure? Let’s see together:
Causes of Franchise Business Failure as a Franchisor
The franchise business itself is an investment that is worth considering. Although there is a risk that there is no one who has the interest to buy the franchise, but as a risk taker, a franchisor will still move forward.
The next step is to create a franchise system. Propose, collaborate with experienced personnel such as accountants, lawyers, financial consultants, and franchise business designers.
However, not a few business people who are not successful in this one business because they have wrong or wrong perceptions about it. Franchisors and franchisees can witness this perception.
The following are many causes of franchise business failure due to the wrong perception of all franchisors. Let’s find out some of these false perceptions so that you don’t adhere to the same opinion:
- Selling a franchise at a high price
- Leave the business down
- Leave the new business open
Causes of Franchise Business Failure as a Franchisee
Aside from being a franchisor, we can also become franchisees in the franchise business. The initial step is to explore a franchise business that according to information from you is worth developing.
If we have pursued a suitable franchise business, the next step is to sign a franchise agreement. But it turns out this business is not a franchise business guarantee; it is a positive step towards success. Both as a franchisor and franchisee, it requires commitment, definition and mutually beneficial cooperation to the extent that the business can run smoothly.
Given that the experience is expensive, my financial will also review many causes of this business failure from the franchise.
Let’s look first at many causes for the failure of the franchise business which is the experience of all previous business people. Thus you can avoid many things as follows when doing franchise business:
- Choosing a franchise business with a franchise fee or high royalty
- Selecting a franchise business with expensive raw material agreements
- Lack of access to good funding
- Maximize marketing with many locations
- Limited creativity
- The good news is that my Financial includes ten techniques to start a franchise business, to the extent that you don’t need to repeat the same mistake.
- Previously, have we separated personal finance and business results? It is crucial that you know, blending individual money and business money can be dominantly bad for your business growth!
10 Ways to Start a Best-Selling Franchise Business
The franchise business can be opened either as a franchisee or franchisor. As a franchisor, you need to develop systems and businesses to be known and accepted by the community.
Whereas as a franchise, you need to be selective and thorough in making a business purchase, then living it so you can make a profit. So, you want to start a franchise business as a franchisor or franchisee? Whatever your options are, consider these ten techniques to start a business:
# Franchisor: Prepare a Good System
As previously stated, the inheritance of the business that has just begun is one of the causes of the failure of this franchise business from franchisors.
Why is that?
Of course, because a new business has not been prepared in such a way as to be able to run, primarily if beginner businesspeople who usually become franchisees run it. A system that has been proven to run well, of course, minimizes errors and errors, to the extent that you do not need to feel the loss that is generally handled by beginner business people.
Franchise business is known as a newbie friendly because generally this business has many advantages, and one of them is there is a transparent system, to the extent that the franchise follow the trail. That is, there must be a system that becomes a guide in running a business, whether anyone runs it. So, not infrequently, make sure the system is running well before we inherit it.
# Franchisor: Develop a Marketing Plan
Another advantage of the franchise business is that the business is not opened from scratch, often this business has a name and is well known to the public. This means that there is a mature marketing plan here that you can share or socialize for franchisees.
Not infrequently the franchisor provides support for this marketing matter for the franchise, to the extent that marketing can continue and never recede. So it can be decided that it is crucial for a franchisor to assemble a good marketing plan to the extent that his business can continue to grow and be worthy of the franchise.
# Franchisors: Make Realistic Proposals
You could say in the franchise business, franchisees and franchisors are one team. The franchise’s success in running a business also supports the development of the franchisor’s franchise brand. Thus, it is necessary to develop relationships and win-win cooperation arrangements.
Only with this technique will we see that all parties (franchisors, franchisees, consumers, employees) feel the positive effects. But I am still created confused sometimes with the rise of fraud based on this franchise. What cheating is meant?
One of them is where the franchisor works on oversell. That is, they give up the artificial lure, so that prospective business people are interested in buying franchises. But this matter is not wise according to the statement from my view. As a good franchisor, it is only natural that you create a reasonable and honest business proposal. Thus, the franchise can also prepare to step on the field.
# Franchisor: Ensuring Product Quality
After World War II, there was a provision called the “Lanham Act” which allows the distribution of brands as long as the brands control the quality of products and services provided. This brought a significant change to the American economy at that time.
Of course, because the franchise system allows consistency in the quality of products and services for consumers, no matter where they buy it. Who has the business or who is the manager is not an essential business for consumers, but the products and services that influence customer experience?
The ability of the franchise system to provide a high level of satisfaction for consumers, no matter where they are or the owner because there is a guarantee of the same quality will be channeled to consumers.
So, we need to specialize in quality control, no matter how much our business develops. This is one of the necessities of the franchisor if its business continues to grow until the following years.
# Franchisee: Careful in Choosing
Generally, not a few beginner businesspeople who will choose a franchise rather than fostering their own business from scratch. The reason is, of course, because the franchise business has been proven to work.
But is that true?
Be careful when choosing a franchise business because there are still not a few scams that are under the guise of a franchise business. The point is to look for information that is not just words but is accompanied by evidence. You can also get information that is already trusted, for example, from colleagues or relatives who have purchased the franchise.
Thus we know which franchise business does indeed have a good reputation and is guaranteed. Don’t be easily tempted by a sweet marketing franchise!
# Franchise: Don’t be tempted by low prices
Besides not being induced by the sweet mouth of a marketing franchise, we are also advised not to be easily tempted to buy a franchise business solely because of its low price. Not that a right franchise is not infrequently expensive, but here you must know the proposal well before assessing whether you will benefit or make a fortune.
You need to understand clearly why the business is offered at a low price, and it should not be up to low prices; in other words, management systems, training, and bad promotions. In conclusion, if you want to purchase a franchise, you should never choose a franchise just because it is priced at the lowest price, but must also understand the quality.
# Franchisee: Determine the Purpose of a Business Franchise
In starting a business, it is very urgent to have a goal. Why? Because the goal will be our map in walking, and this destination will also be the spirit of the times when it is difficult.
Steven Covey in his book Seven Habits even reveals that judging destinations are one of the norms that can bring success. It doesn’t matter if you want to open a franchise business as a full-time activity, or just as a sideline: determine your destination!
# Franchise: Don’t Want Instant
Our advice, we should never choose to start a business caused by getting money alone. This is due to the risk of profit and loss in doing business. There is a time to feel the loss and time for big profits.
So, even though you already have proper brand recognition (in other words the business has been known to the public to have a group of consumers who have an interest in buying the product), it should not be a franchise business as an instant stepping stone to wealth and success. Everything, classified as a franchise business requires process, patience, and hard work.
Those who succeed in a moment do not necessarily succeed in the future, so it is urgent to go through the process according to your skills to learn the gaps and solutions to continue to fix the business to be better.
# Franchisees: Planning for Funding
If you have assessed the franchise business that you want, then you have to start taking into account how little it is that we have to prepare to run the business.
The franchise business is undoubtedly a variety of those that require little capital to the most magnificent capital. You need to prepare locations, equipment, and inventory to start a franchise business.
In the franchise business, you usually also need to carry out a franchise fee and project and advertising fees in place of the training, procedures and marketing costs that have been prepared by the franchisor. The question is where is the money from?
Yes, you need to plan to fund correctly. Here are some considerations for funding sources:
- Some franchisors (franchise providers) generally help franchisees (franchise recipients) in matters of financing by collaborating with loan lending agents to help franchisees get funds to start a franchise business.
- Franchising financing company is a company engaged in franchising funding with the technique of finding borrowers and suitable lenders then helping both parties to reach an agreement.
- Traditional loans, namely loans from banks.
- Small Business Administration (SBA) funding loans or so-called small business administration is one of the widespread franchise funding.
Of the many funding sources that have been recited before, you can maximize the utility by combining many loans to suit your needs.
Don’t rely on just one loan, but you can mix and match to produce a tiny combination of losses and risks.
If we are still in doubt, ask your financial planner directly before starting a franchise business, like for example my financials who are often ready to help you.
# Franchisee: Get to know the chosen franchise
As previously stated, there are still not a few franchise businesses that lure instant spectacular successes instantly. Unfortunately, this business is not specified.
That is, you need to recognize outside in the business that you are going to live. Do not arbitrarily choose a runny company.
Some tips on choosing a franchise business are as follows:
- Know your reputation and business trip carefully
- Look for people who already have experience
- When starting, you may not directly select a big business that requires high costs and not a few employees
- Find out whether the franchise is being punished by law or not, and often avoid businesses that have problems with the law
Prove It Yourself: Become a Successful Franchisor or Franchisee!
In business, there must be so many problems and obstacles, as is the case with the franchise business. There has never been a 100% success guarantee in the name of BUSINESS.
But we can go through all of that if you concentrate and motivate it. Remember a good business may not work overnight, but success can be reached at a slow but sure stage. We are confident that we can also become successful franchise businessmen if we adopt an unyielding attitude and slam and smart!