What Challenges to Expect During your First Year as a Franchise?
Franchises are becoming popular by the day. Their innate ability to expand businesses across all spheres is worth noting and entrepreneurs all across the globe are taking note of its rising efficiency and presence in the market. Franchises are one of the few methods to garner venture capital without relinquishing complete control of the business and that is exactly what attracts people towards investing in them.
The pandemic did push back businesses into the cocoon of debt and plunging loss but businesses are making a solid comeback in 2022. After more than 2 years of at home restrictions paired with economic uncertainty, more and more people are diving into the world of entrepreneurship. In 2022, franchises must focus on the growth pool in terms of a strong marketing plan, public relations etc.
Your first year as a franchise owner would be both exhilarating and scary to say the least. Since you’re your own boss, all the decision making falls on your shoulders which can be pretty daunting in the initial phases of your journey. You’ll be asked to simultaneously look into matters like time management, budgeting and more.
Now that you have taken the plunge once and for all, here are some of the challenges you are most likely to face and a quick look at the ways to adapt in order to wade through!!
Seven Common Challenges Encountered By Franchise Owners
1 Lack of funds
Business ownership is a fluid world and the transition from your predictable employment position to this can be extremely hard to adapt to. One of the aspects you’re most likely to fumble is the finances associated with your franchise.
This does not mean that investing in a franchise is something not worth doing but any endeavour of this magnitude would require time and patience for you to understand it in all its entirety. You would take your own time in building your consumer base and generating profit.
The best solution to this potential concern is to always have buffer savings that would account for at least the essential expenses. Some franchises also aid in this by not demanding any marketing or management fees for the initial time span and might wait for the loan repayments till you’re generating sufficient profit.
The most important thing to keep in mind is that sooner or later you will reach the desired position on the business ladder.
2. Time Management
Any franchise demands you to play a large gamut of roles all at once, mercilessly. One moment you could be the manager and the next you could be the accountant. Being the ‘jack of all trades’ is something that will be asked of you too often and it is imperative that you do so. You would have to devote a sufficient amount of time for each of these tasks.
Most franchises are very understanding when it comes to this and will strive to take the load off your shoulders. They provide support in the form of admin, management and sales programs. The help could appear in any form, be it a software that makes your work easier or a support team. You can always look up to your franchisor to guide you through this phase.
3. Self Doubt
To finally step out of your comfort zone and take a step in the direction of your dreams would also induce a sense of self doubt and put a question mark on your self worth. When the finances don’t start rolling in immediately, you might question your decision of doing this in the first place.
Research suggests that 95% of all startups actually drown in the first 5 years but franchises are different. Around 95% of franchises thrive and make profits in the first year itself.
If you do find your confidence and self esteem hanging by a thread at some point, seek perspectives of the likes of your franchisor, your support team etc. Their own experiences will give you a sense of belongingness and eliminate the feeling of impending doom.
4. Financial Sustenance
Just generating profit is not enough, you must strive to manage and sustain it too. With the constant fluctuation in income, this task would seem like a hurdle. In a situation like this, you might feel confused regarding the amount of cash that you can afford to spend and what portion of it should be kept in order to keep your cash flow strong. A simple answer to this problem is to consult your accountant.
5. Long Approval Process
To strike the optimum deal and establish a successful franchise, it is imperative that the brand fulfils the expectations of the franchisee and the franchisee is a right fit for the brand. Another reason why you should get it absolutely right is that the contractual agreements are long term, mostly 10-15 years so any form of discontentment in the later stages of the agreement would be difficult to overcome.
To deviate from this issue, you must collect all the necessary documents and try to follow all of the franchisor’s requirements. Take some time to access the structure and functioning of the franchise before going all in.
To strike the optimum deal and establish a successful franchise, it is imperative that the brand fulfills the expectations of the franchisee and the franchisee is a right fit for the brand. Another reason why you should get it absolutely right is that the contractual agreements are long term, mostly 10-15 years so any form of discontentment in the later stages of the agreement would be difficult to overcome.
To deviate from this issue you must collect all the necessary documents and try to follow all of the franchisor’s requirements. Take some time to access the structure and functioning of the franchise before going all i
6. High Operating Costs
The initial cost of starting a franchise is massive. Opening costs and license fee would drown you in that feeling of financial doom. Mentioned below are some franchises and their respective costs:
Subway: Rs.25,00,000 to Rs.30,00,000
- Pizza Hut: Rs.14,00,000 (excluding royalty fees)
- Baskin Robbins: Rs.12,00,000 to Rs.18,00,000
On ground zero there is no fool proof way to avoid royalties and fees as they are integral to the process of striking a deal with the franchisor. You can however mitigate these costs by making wise and well informed decisions when it comes to choosing contractors and renovators and other labour-inducing parties involved.
7. Less Decision Making Power
Independent business owners get way more power when it comes to decision making and choosing the course of their business on a daily basis. This is not the case for franchises. They have to check up with the franchisors regarding each potential change or even a minor amendment to pre-existing guidelines.
Your point of view matters no matter what so in case you feel you want a slight change in the ebay your franchise works, go straight to the franchisor and there is a 99% chance that your opinions will be heard and even approved.
The fear associated with investing in a franchise is immense and overwhelming too but with a little patience and zeal, you will pull through. The process comes with its own set of challenges, but a majority can be eliminated with just a slight positive shift in mindset and some minor tweaks in your day to day working!!