Dangers of Franchising Your Business Too Soon

This might be hard to do, but imagine you are looking to buy into a franchise. You find something that looks promising and you buy into the concept. As a new franchisee your expectations are that you are buying into a program that is already figured out. You are under the impression that all you really have to do is learn all the secrets such as: best ways to operate the business; best practices for hiring and training employees; and (most importantly) how to make money (just to name a few). 

You are soon disappointed because you quickly realize that the people who you bought the franchise from don’t know any more about these things than you do and subsequently aren’t much help. It becomes clear this business should have never been franchised in the first place (read more about why our President started The Franchise Maker to prevent this type of thing from happening) because the franchisor doesn’t even have their own business figured out.

Now back to real time. You are excited about wanting to franchise your business and maybe you even built your concept with franchising in mind. So what are some of the reasons not to franchise which would indicate that franchising is premature (see our article on this topic, “Disadvantages of Franchising When You’re Not Ready: Top 5 Reasons NOT to Franchise”)? You sure don’t want to end up like the franchisor in our imaginary scenario. Let’s explore some of these reasons now.

What Makes It Too Soon?    

If you haven’t mastered every aspect of how to operate your business yet, then it is too soon to franchise. Besides mastering operations, you need to have the experience under your belt of dealing with the headaches, challenges and everyday problems that arise as you are doing business. It’s necessary that you have gone through such things because as a franchisor your role is to mentor and guide your franchisees when they have similar challenges. So, if you are a newer business and haven’t been operating your business long enough to have a full cycle of seasons under your belt it is too soon to franchise (for more on what to bring to the table in order to start franchising visit our Frequently Asked Questions). You need to know if there is seasonality to your business. Maybe there are significantly slower times in your business you did not anticipate that catch you by surprise. How do you compensate for these slow times?    

If you want to franchise an idea or just launched your business it is likely you lack proof of concept (an exception might be that you have been in the industry and have operated similar businesses close to what you are wanting to franchise). You may think that you have proof of concept but in reality what you are thinking of offering might just be a fad and doesn’t have much of a lifespan (see our article, “Does a Business Need to be in Operation Before Franchising?”). The bottom line is franchisees are expecting you to teach them how to be successful and if you are just starting out then you have not really figured it out yourself. And if you are looking to franchise because you are struggling and want to make more money…well that leads to disaster. It makes no sense to franchise if your own business is not doing well.

What Happens?  

Franchisees not only invest their time, energy and resources (including leveraging their assets) but also change their lifestyle to jump into a franchise program. So it is not unrealistic that franchisees expect that you have all the answers and you will lead them down a path to help them be successful. When that doesn’t happen franchisees feel disgruntled, cheated, misled and defrauded. And honestly they are right. Who is to blame them? Franchising is regulated to protect the consumer (in this case franchisees) against fraud. As a franchisor it is your responsibility to have a well-developed system and continuously generate a community-of-interest for your brand. If you don’t have a well-developed system that encapsulates every aspect of your business (learn about our strategies when building franchise systems) and you end up selling someone a franchise; then you just gave that person a reason to claim fraud.    

This is not to say that you must have every single detail of your business completely figured out and there is no hard definition for what is considered to be “operational success”. You can use franchisees to test market a service or product later, but the meat and potatoes of your business must be already figured out.  Problems arise when a franchisee has been misled to think they are buying into a solution that will lead them to success and it turns out to be a joke (like our imaginary example). You could be sued for fraud and once peoples’ lives are destroyed, they might seek revenge, retribution and retaliation which all leads to litigation. All of which harms you, your franchisees, your reputation and your brand.  

Know Your Stuff  

If you want to avoid the dangers that could come with franchising your business then make sure to heed our advice. Learn your business cycles and how to stay afloat during slow times. Know how to attract business, generate revenue, deal with employees and be prepared to share your trade secrets on hiring and retaining people. No matter how badly you want to franchise… don’t end up like the franchisor in our imaginary scenario. If after reading this you feel you have these elements figured out then we encourage you to contact us or give us a call at 1-877-615-5177. We will gladly answer all your questions and determine if you are really ready to franchise your business.