fbpx

3 Errors to Avoid When Considering a Franchise Opportunity

John Cohen of Rhino7 Franchise Development Corporation has seen them all, when it comes to the pitfalls encountered by the typical individual who seeks to take the plunge and buy a franchise. Cohen talks here about three of the most common mistakes that new entrepreneurs make as they look at becoming franchisees:

Failing to know their financial needs. Almost all franchises take at least one year, often closer to two years, to begin generating cash flow. Cohen said many people ignore this fact when they forecast what they’ll live on while their new enterprise gets off the ground. “If a prospective franchisee hasn’t already done their own ‘needs analysis’ before they come to us at Rhino7, we make it the first thing they must get done before our dialogue can go much further,” he said. “The reality is that many folks simply can’t afford to be without a steady income while their franchise gets stable. It’s best for the franchisee, the franchisor, and for Rhino7 to find that out early in the process.”

Looking at opportunities with tunnel vision. “So many people come to us with preconceived ideas about a particular industry. Restaurants are a great example of this,” Cohen said. After patronizing a busy sandwich shop or fast-food establishment, it’s easy to conclude that a horde of customers always equals profitability, and many budding franchisees jump to this conclusion. This must be a winner, they think, and so it’s the one for them.

“What I encourage new franchisees to do,” Cohen said, “is take their focus off of the widget, which is what the business sells, and the space, which is the competitive environment where the widget gets sold. Instead, folks will do better to look at their own skill sets, and find a strong business model where their skills and desires will be put to work most effectively. An open mind really helps here. The widget and the space need to matter less than a comfortable fit between the business model and the franchisee’s own aptitudes.”

Giving in to paralysis from analysis. Any business venture carries with it a measure of risk; this is a basic tenet of economics. Cohen sees too many first-time entrepreneurs trying to remove all risk from their decision to take on a franchise opportunity. And it just doesn’t work.

“Should you do your homework and be informed? Of course,” he said. “But you won’t get a foolproof, set-in-stone answer to every question. Ultimately, you’ll take the leap, or you won’t. You can’t analyze away all of the risk of being in business. What I point out to prospective franchisees is this: owning and running a business is all about making decisions, one after the other, every single day. If you get so bogged down in your very first big decision – being in business to begin with – it doesn’t bode well for your ability to make rapid-fire decisions later on. You’re probably best off working for someone else.”

Contact Us

By filling out the contact us form, you agree to receive text messages from Rhino 7 Consulting related to Franchising. Message & data rates may apply. Message frequency varies.
View Terms of Service and
 Privacy Policy .