Top 5 Reasons Why Franchisees Struggle
Jul 23, 2024
Business owners and franchisees face many challenges running their businesses, which can cause them to feel overwhelmed, stressed, tense, and overloaded by everything they have to see and monitor.
In over 35 years of experience observing, helping, training, and coaching franchisees, I have identified the top five reasons franchisees struggle.
If you identify with any of these battles, you are not alone! By the end of this blog post, you’ll find out how the American Franchise Academy can help you.
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Reason #1: The wrong franchise
To begin with, franchisees may have picked the wrong franchise. This can be either because it is the wrong fit for that particular franchisee or because the franchise model itself is not healthy or mature enough to be a franchise.
- When it comes to owning and running a business, it is critical that you enjoy it and feel passionate about the product, service, or industry you’ll be participating in.
When selecting the franchise you want to buy, you even have to consider the type of employees and customers you’ll have so there are no surprises in the future, and you can be successful in that business.
On the other hand, maybe what’s wrong is that the franchise model has not been developed to the point where the average entrepreneur can do an average job and management so that it can be successful.
To prevent this, you need to confirm that the model and its elements, such as the product, the service processes, the cost of goods, and the labor cost necessary to manage that franchise, are economically favorable.
In case you missed it: Choose the Best Franchise! 6 Tips to Find Your Perfect Match
Reason #2: Not enough capital
Many people get into franchising because they dream of having their own business and can invest a certain amount of money and savings in it. But starting a business is more than just buying a franchise.
You must have enough capital to operate that business for whatever time is required to reach the break-even point. This may take longer if it’s a new and unknown brand than a legacy brand with a solid client base.
Franchise owners also have to consider that there are specific requirements regarding how much capital they need to have liquid and how much access to capital they should have based on loans and credits. This is critical, especially to protect themselves in case the economy slows or a natural or man-made disaster occurs.
Don’t miss: Access Capital with No Personal Guarantees. This is How
Reason #3: Don’t have business knowledge
You may have the will, desire, and willingness to work, as well as the money to acquire the franchise and manage the business. However, your operation will be a constant challenge if you do not have the business acumen to understand how to turn that brand into a profitable business.
- This means knowing how to define, create, develop, and document processes and procedures to manage the business profitably.
This knowledge is vital because when you buy a franchise, you get the brand, the product, the service, and the image of an existing, proven brand. However, the franchisor doesn’t give you the know-how to manage the business; without this experience, you and your team won’t be able to take the necessary actions to succeed.
Reason #4: Poor leadership
The fourth reason franchisees struggle is that they’re not good leaders. But what is a good leader? They inspire others to be the best they can be and motivate them to do a good job every day.
Think about it! Everything in the franchise world is done through people. And if you cannot encourage people to perform at their best and with a high level of excellence, you will have difficulties running your business. You could have all the required business understanding, all the capital you need, and a great brand, but if you cannot inspire others to be great, your franchise business will be very challenging.
Not everyone has those leadership skills, but thankfully, you can learn how to become a better leader.
Reason #5: Not good trainers
Franchisees also struggle because all of this information and knowledge needs to be transferred to the employees, especially to the leaders of the organization. You may be a great business owner and leader and have a clear understanding and management of the business, but if you cannot train your people and let them know how to do a good job, your business will be a challenge.
Being a trainer requires a specific set of skills because you have to teach your team the brand’s systems, processes, and procedures and those you created for the business. You even have to instruct your leaders so they can be successful managers and teach your teams how to be good employees, considering that franchises tend to be the first job for young generations.
That’s why having these skills to train people is critical for your business to thrive. If you don’t have this ability, finding someone who can take this responsibility would be best.
Don’t miss: Training Is Expensive! But Lack of it Costs More
It’s not easy to become a franchisee or a business owner. In my experience, these are five of the most critical challenges they face. If you identify one or more of them as your everyday struggle, you are not alone!
Follow the American Franchise Academy on our YouTube channel and podcast, where we share valuable information to address these needs and help you manage a multi-unit organization successfully.
If you want to learn more, explore our best-in-class programs, designed to support you as a multi-unit franchisee, your unit managers, and your district managers.
Reach out to us! We can help you achieve your dream of business ownership through franchising into a multi-unit enterprise so that you can achieve your desired time and financial freedom.
Reflections:
- Are you happy and satisfied with the franchise you bought? What would you change?
- Do you or your business have a good credit score?
- What kind of leader are you?
- How well have you transferred the brand and business knowledge to your team and leaders?
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