Franchising Your Business – Avoid the Biggest Mistake

Chuck Modell August 30th, 2017

There are a lot of mistakes one can make when initially franchising a business, from trying to copy documents used by others (that may not work for you at all), to not being prepared to offer proper support to franchisees. However, the biggest mistake a start-up franchisor can make is in its initial selection of franchisees. Particularly when the franchisor is strapped for cash, it is too easy to use the “mirror test” in selecting franchisees – if they have the money, and can fog the mirror, you take them.

It is critical that your first franchisees reflect the type of franchisee you want in your system. Are they prepared to follow the system? Do they have the proper skill set to be successful in the business, whether that means a cheerful personality, a true passion for your brand, or technical skills required for the business? (The best answer is “all of these.”) Do they have the time and resources to devote to the business?

When you get beyond your first year in franchising, you will be listing your initial franchisees in your franchise disclosure document. If you want to show prospects the kind of money they can make in the business, you will also need to use results from your early franchisees. If these early franchisees are not successful, they will not validate your system and it will be very difficult to overcome these failures. Perhaps even worse, if they are litigious, you will spend the next few years with lawyers and in courtrooms, an expensive and time consuming proposition, rather than growing your business. For these reasons, it is critical that you do your due diligence on prospective franchisees and satisfy yourself not just that they have an interest in your brand, or can “fog the mirror,” but that they will be a “fit” for your system and likely be successful.