Franchising offers a tempting shortcut to owning your own profitable business.
You get proven systems, marketing, and a roadmap to follow.
But shadowing a big brand’s success isn’t as simple as it seems.
Success comes down to your ability to execute the playbook
But most of these failures trace back to just a handful of easily avoidable mistakes.
In this newsletter, I’ll show you:
- How to NOT start a franchise
- The 4 big mistakes new franchisees make (and how to avoid them)
- How building my new painting franchise from scratch (we launched 3 months ago)
If you can avoid these mistakes, you’ll have a major head start on building your first franchise.
Mistake #1: Hiring (and Keeping) The Wrong People
Hiring people is like shuffling a deck of cards.
Before finding an ace, you need to get past a bunch of 2s, 3s, 4s, 8s, etc.
The only way to speed up the process?
Fire your low numbers fast.
But that’s easier said than done.
What if that 5/10 you hired is a friend of yours? What if they’re trying their best, but they just aren’t cut for the role?
Bringing on friends as employees may seem like a safer choice initially. But it often backfires when you can’t terminate them easily if they underperform.
Firing these underperformers is hard. But holding on to them is harder.
That’s why having weak leadership is a death sentence for any franchise.
To avoid this mistake, follow 3 principles:
1) Hire slow, fire fast – there’s a reason this is the most common hiring advice.
2) Realize that C-players never become A-players – it’s easier to replace the employee than to change them
3) Separate the decision from the relationship – firing a friend doesn’t mean you don’t like them
Mistake #2: Being Undercapitalized
Having capital and a year’s worth of runway makes starting a franchise from scratch easier.
Lacking a financial buffer leads to 3 terrible things:
- You’ll feel constant pressure, so you enjoy the ride less
- If something goes wrong, you have little margin to save yourself
- You can be forced into short-term investments just to hit break-even fast
Sometimes the business takes off quickly. Other times it takes longer than you plan.
Nobody has a crystal ball so budget in more money than you think you need.
If you don’t have that margin, wait to start a franchise. At least that’s what I’d do.
Mistake #3: Unrealistic Expectations
Franchising is not a get-rich-quick scheme. Even though you follow a proven business plan, you’re building a business from scratch.
The unrealistic expectations go two ways:
1) Thinking building a franchise is easier than it is
In reality:
- Getting from 0 to 1 requires insane effort
- Nothing can prepare you for starting your first business
- Even though you have a proven plan, you need to execute
2) Overestimating the potential earnings from a franchise opportunity
Remember:
- Few franchises are profitable from day 1.
- Few franchises make money in the first months.
- Few franchise owners are out of the business after 1 year of work.
Here’s how I’m managing my expectations for my new franchise:
1) I don’t evaluate success on a 1-year basis, but a 5-year one – this gives me more time to succeed.
2) My first goal is breaking even – because I know if we get there, we’ll eventually become profitable.
(Of course, as a first-time franchise owner you may be dependent on the income sooner than that. But keep your time horizon as long as possible.)
But the biggest mistake of them all? Not following the proven franchise model.
The big benefit of franchising is that you get access to a proven business model:
- Systems to apply
- Exact growth KPIs to hit
- Support from the franchisor
But many franchisees fail to follow the plan provided to them.
99 times out of 100, this leads to them going bankrupt.
Don’t do anything creative until you’ve hit the growth KPIs of your franchise.
You have the playbook to win right in front of you. You don’t need to reinvent the wheel. You just need to make it spin.
That means hitting the KPIs your franchisor gives you.
We’re three months into my new franchise, and I’ve set only one clear goal for all employees –
We need to hit 10 estimates per day as a team no matter what. If we have to knock on every door in the neighborhood, then that’s what we’ll do. Following the system is non-negotiable.
Everything else comes second.
Follow the proven formula, and you’ll make it through the tough startup phase.
To sum it up, here’s how to NOT start a franchise:
- Step 1: Hire D-players only (and make sure to keep them forever)
- Step 2: Bring the minimum capital required (and spend it on luxury office furniture and corporate retreats)
- Step 3: Expect to earn millions from the first hour of operating (else franchising is not worth your time)
- Step 4: Don’t follow the franchisor’s plan (in fact, do the opposite)
If you follow this guide, you will fail and lose all your money franchising. I guarantee it.
Anyway –
All these mistakes are avoidable if you know what you’re doing.
My team and I built a $40M franchise.
If you want us to help finding the right franchise for you, book an advisory call here (free, but limited spots).
With the proper game plan and mindset, you can make it happen.
Cheers,
Brian Beers
