When you buy a franchise, you expect value for your investment. You paid an initial franchise fee and you will be paying royalties and advertising fund fees for years to come, and you – rightfully – expect something in return.
However, as a franchisee, the onus to succeed is ultimately on you. No matter what the franchisor’s sales representatives told you during the pre-buying process, and no matter what your preconceived notions of the franchise relationship may be, as a franchisee, you are responsible for your own success. While you should be able to count on your franchisor for basic system support and to grow the general recognition of the franchised brand, it is up to you to turn a profit as a franchise owner.
5 Key Considerations for Early-Stage Franchisees
So, what does this mean from a practical perspective? While every franchise opportunity is unique and industry, geographic and other factors will greatly influence the profitability of any individual franchised business, some steps early-stage franchisees can expect to have to take on their own include:
1. Marketing the Business Prior to Opening
Grand opening expenditures are (or should be) included in the Franchise Disclosure Document’s (FDD) Item 7 estimated initial investment disclosures, but even the high-end estimate will often fall far short of what franchisees need to spend. Social media and local grassroots marketing efforts may be necessary as well, and franchisees will often benefit greatly from building awareness while they work toward opening for business.
2. Developing and Executing a Business Plan
Having a brand and a system is a good start, but it isn’t enough to build a successful business. New franchisees should devote significant time and effort to developing a business plan, working with professional advisors if necessary.
3. Hiring Skilled and Trustworthy Employees
If you will be hiring employees, all employment-related tasks will be solely your responsibility. From conducting interviews and background checks to determining what is a competitive (but sustainable) starting salary, the decisions you make related to employment could have a significant impact on the success or failure of your franchise.
4. Building Goodwill in the Local Community
As a franchisee, your marketing efforts cannot stop with your grand opening. Even if you are required to pay a monthly advertising fee (as most franchisees are), you likely are not guaranteed to see any direct benefits from your “contributions.” Building goodwill in the local community will help you grow your customer base while encouraging repeat business, and it will ensure that you are not beholden to your franchisor’s “systemwide” marketing efforts.
5. Holding the Franchisor to Its Obligations
While your franchisor’s obligations may be limited, the obligations it does have are likely to be fairly significant. As a franchisee, it is up to you to hold your franchisor accountable. Whether this means joining forces with other franchisees or pursuing legal remedies through litigation or arbitration, franchisees must be prepared to assess the options they have available.
Nationwide Legal Representation for New and Experienced Franchisees
If you are thinking about buying a franchise or struggling to succeed as a franchisee, national franchise attorney Jeffrey M. Goldstein can help you make informed decisions. To learn more in a free and confidential consultation, please call 202-293-3947 or inquire online today.
