As the franchise boom dies, disputes are breaking out as franchises become tougher to manage. So how to avoid the problems that can bring apparently successful operations unstuck?
The past decade has been very kind to the franchising industry. The sector now represents 14% of the nation’s economy. But growth in franchise chains is slowing, as consumer confidence has moderated and the sector is competing with the booming mining and construction industries for franchisees and employees.
Tougher times mean franchisors have to be better operators to make money and grow. And it is more important than ever that franchise chains don’t make mistakes. Mistakes in franchising can lead to disharmony within the franchise system, disputes, loss of reputation, and business failure.
You do not have to look any further than the well-publicised disputes in the Midas car care chain and the Bakers Delight systems to see how problems in the ranks can trouble successful businesses.
Here are 10 of the worst mistakes you can make in franchising, and how to avoid them.
1. Selling franchises, not granting them
Part of the attraction of the franchise business model is that franchisees contribute capital to the business to help it expand. Every extra franchisee is extra cash into the business.
But beware. This can be a trap. Franchisors can be tempted to sell a franchise to anyone with the cash and “a pulse”, or so the saying goes. Not all comers are suited to franchising and many will be unsuitable for a particular franchise system.
They may not have the skills, the inclination, or a true understanding of what will be required of them. Once the franchisee has made the investment in the franchise chain, they have an expectation of success. If those expectations cannot be met, there is likely to be conflict and disharmony, which may spread to other franchisees.
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