Franchising: The Greatest Challenges

Posted on: February 19, 2020 by RMS Hospitality

For those looking to step into or expand their reach in the world of franchising, the opportunity is nothing short of exciting. The idea of starting and profiting from a successful franchise business can get the creative ideas floating, but this should come with plenty of caution. While it’s exciting to think about, it’s important to look at the challenges that face the franchise world.

Working Within a Strict System

Just because franchising comes with the opportunity of being your own boss, it can still put you in a box when it comes to restrictions and rules. Conformity to the operations manual of a franchise is important if consistency among your franchises is to be upheld.

Risking It All

As with any business being built from the ground up, there is a considerable amount of risk to consider when planning and strategizing. Because the franchisee owns the business, they determine the potential success of the venture. So, while the credit can go to the franchisee for the success, they should also be aware of the fact that they’re on the hook for its failures.

Risk comes in all shapes in sizes, and can hurt a franchisee significantly in terms of reputation, business, finances, and more. Having franchise coverage can help provide protection from losses due to a number of liabilities helps to provide peace of mind to at least lower the impact of risks.

Lofty Expectations

Some people buy a franchise because of its potential for earnings and expansion. But the accomplishment of past franchises doesn’t dictate a new one. Each franchise should be looked at as a case-by-case situation in which any variable can alter the outcome. Franchising requires time, effort, and industry. Prospective franchisees should talk with the franchisor about realistic expectations when explaining what is required to operate a business and what they can expect in return for their work.

Working with a Franchisor Can be Frustrating

Buying a franchise is highly dependent upon the relationship between franchisee and franchisor. This should be a healthy relationship that lasts a long time and bears financial fruit. The relationship will be important so the franchisee should get used to the idea that they have to work closely with the franchisor and be communicative.

Sufficient Capital

Many businesses fail to succeed based on undercapitalization. The same is true for new franchises. This is a major challenge since the cost of creating the franchise system usually exceeds royalty revenues and fees. This can be credited to new franchisors underestimating the amount of capital that will be necessary to get the franchise to a comfortable point where it can be self-sustaining.

About RMS Hospitality Group

At RMS Hospitality Group, our expertly crafted policies are written specifically for the hospitality industry. We offer custom-tailored solutions to meet any venue’s specific needs. For more information, contact our knowledgeable experts today at (888) 359-8390.

Posted in: Franchise Select

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