Top 3 Mistakes First-Time Franchisees Make and How to Avoid Them

How to Avoid Mistakes When Buying a Franchise

It’s officially spring!  And that means more sunlight, warmer temperatures, and unfortunately, more mosquitoes.  If they aren’t already, many Mosquito Joe locations in the southern half of the country will be opening for the season within the next few weeks.  By now, our network is comprised of nearly 100 experienced franchise owners with one or multiple seasons under their belts going into the 2016 season.  And with Mosquito Joe’s rapid growth, another 25-30 owners are expected to launch their businesses this year.  Opening your own business is a big life decision, and choosing to open a franchise requires just as much thought and research.  As the franchise industry continues to boom in this country, it’s easier to see trends in certain industries and the decisions new franchise owners make when opening a business.  To help ease some stress, we’ve put together a list of common mistakes new franchisees make and how to avoid them.

Mistake 1: Skipping the Research

There are plenty of business opportunities claiming to be “huge successes” or “the best decision you’ll ever make.”  But for every successful franchise out there, there are a dozen others that are too good to be true.  You want to be careful about picking a business that not only suits your goals but is viable in the long term.  Ask questions like: is the market for this business growing?  is there a need for this business?  is the franchise as a whole showing solid growth and success?

Once you’ve gotten a sense of the general picture, there are multiple ways to take the next step.  A franchise broker will work with you to determine which type of franchise fits best based on your interests, financial situation, and goals.  You can also take this on yourself by consulting franchise portals such as Franchise Gator, Entrepreneur, and Franchise Solutions.  There, you can sort through individual franchise profiles to find more information such as start up costs, growth rates, and ongoing fees.

Once you’ve narrowed down your selections and begin seriously talking to potential franchisors, you want to follow up on every bit of information they provide.  You can do this by having a third party, such as a lawyer, review any documents or materials given to you.  You should also call current franchise owners in that business to ask them about their experience.  They will be the best sources of information, especially if this is your first time in franchising.

Mistake 2: Underestimating or Misunderstanding Financials

Before you begin the process of choosing a franchise, you need to evaluate your financial situation and accurately determine how much you have to invest and how much you’re willing to spend on a new business.  The answers to these questions will usually narrow down your field of options dramatically.  Once you start talking to franchisors, you should scrupulously review each Franchise Disclosure Document.  This document includes background about the company, start up costs and fees, and overall performance.  Some franchisors, like Mosquito Joe, dedicate an entire meeting to reviewing the FDD with you and addressing any questions or concerns you have.  Some do not.  Regardless of the process, prospective franchise owners are encouraged to show the document to a lawyer or counselor for further review.

There is a lot of information in a Franchise Disclosure Document, usually an overwhelming amount.  While every element is important, be sure to note the initial and ongoing investments required.  Oftentimes, the start up costs seem reasonable only to be followed by inflated fees and overhead charges.  Compare these numbers to those you originally planned and honestly evaluate the opportunity before moving forward.

Mistake 3: Not Understanding the Franchise Model

There are many reasons to buy a franchise.  High among them is wanting to be an entrepreneur with the backing of a support system to help in certain facets of the business.  While franchisees may understand this theory, they sometimes have difficulty putting it into practice.  They may want more autonomy in running their business than the franchisor will allow or they rely on the franchisor far more heavily than is necessary.  If you are new to franchising, part of your homework should be to understand the basic franchise model and how franchisor relates to franchisee.  As you get closer to making a selection, you can further investigate each franchise and its Corporate culture to determine how it will fit with your vision.  The most important thing to remember is that franchising is a team effort, relying as much on the franchisor as on each individual owner.

The process of choosing and opening a business can be overwhelming, scary, and a whole list of adjectives too long to fit in this post.  Luckily, there is a multitude of resources available to help in your research and decision processes. Please visit our franchise information page if you are interested in learning more about the Mosquito Joe franchise opportunity specifically.  And check back here for continuous updates about Mosquito Joe’s franchising adventures!

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