Opening up your first franchise is sure to be a thrilling milestone for you as an entrepreneur! You've completed the task of sorting through franchise business opportunities and now you can finally get to work — becoming your own boss. Though this milestone is something to celebrate, you should know that your first year or two running a business can be tough. If you've never been a business owner before, then it will be an adjustment. You have to learn to navigate time, budget constraints, marketing, and more.
This can be intimidating, but you don't have to worry. You have the support of your franchisor and other franchisees, and you will feel so accomplished once you've made it past this turbulent time. To prepare you for some of the struggles of the early days, let us walk you through some of the challenges that you'll likely face as a first-time franchisee.
When taking your first plunge into business franchising, you may not expect to wear as many hats as you do. Until you have the income to hire a multitude of professionals to do your bidding, you will serve as the manager, marketer, administrator, hiring manager, and accountant for your business. Finding the time to dedicate to each role, and attempting to have time for yourself, can feel overwhelming.
One benefit of working as a franchisee is that your franchisor often offers assistance with some of these tasks. Investing in a franchise comes with more than just the brand's name. It comes with software and staff to help with marketing, finances, sales, and administrative duties. If your franchisor doesn't provide this specific support, they and other franchisees are still able to give you guidance on time management.
While being a business owner can sometimes make you feel like you're on top of the world, it can also make you feel incredibly scared. At some point, you will probably ask yourself, "What have I gotten myself into?!" During these times, it helps to remind yourself that by working under an established franchise, you have already set yourself up for success. Those working independently to start their own business will often, unfortunately, not experience lucrative results. According to Investopedia, only 80% of independent startups survived after one year.
When you find yourself feeling insecure about the future or losing your confidence, don't feel as though you need to suffer alone and push through it. Pick up the phone and contact your franchisor, fellow franchisees, another entrepreneur that you respect, or even someone in your close circle of friends and family. Speaking your doubts aloud will help you work through them, and other business owners will be able to provide reassurance that they've felt the same way you do now and came out the other side as better business owners.
Lacking Sufficient Funds
Seeing an initial deficiency in your finances is to be expected. This doesn't mean that franchises are unwise investments, but that it will typically take some time to create a loyal consumer base and begin seeing a profit. Having savings set aside in anticipation of this time helps to keep your head above water. Deciding to suspend some fees for a few months, such as management or marketing fees, or putting a pause on repaying a loan can also help to alleviate some of the financial stress.
The period of financial insecurity that you face may depend on how recognizable your franchise is. According to Statista, in 2020, the most famous and most lucrative franchise in the United States was McDonald’s. The business brought in over $93 billion in sales. This doesn't mean that you necessarily have to choose a popular franchise to work with. However, keep in mind that if you aren't choosing one of the big restaurant franchising opportunities out there, then you can expect to work hard to get your business' name out there and gain the trust of your community.
Once your business becomes stable and your finances are in good condition, then you have the undertaking of properly managing them. While you may have some experience in keeping your books in order, you now have to make informed financial decisions. As a first-time franchisee, this isn't likely to come naturally.
The hesitancy that you feel can sometimes be a positive thing — you presumably won't be making first-thought or risky choices. You will, however, need to eventually feel confident in how you're spending your money, when you're spending your money, why you're spending your money, and when you're saving your money. This confidence will come with time. Until that happens, rely on the training and resources given to you by your franchisor. Don't be afraid to ask other franchisees about their finance managing techniques and mistakes that they've made.
Invoices can be another area of confusion for first-time franchisees. Certain franchises will take care of invoices for you or offer software that takes you out of the invoicing equation. But, if this task sits on your shoulders, consider reaching out to a professional accountant for counseling.
Keeping Track of Taxes
Taxes aren't one of the most exciting aspects of being a business owner, but to thrive in business franchising, you do need a comprehensive understanding of your tax obligations. Taking the initiative to do so early on will prevent mistakes and owed fees down the line. Worse, you could risk breaching your franchise agreement. Some of the taxes that you may have to pay as a franchisee include:
- Capital gains tax
- Corporation tax
- Franchise tax
- And more
If you don't know where to begin, then consult with your franchisor or an accountant.
The challenges previously discussed are more or less inevitable. That being said, there are ways that you can mitigate some of the stress you will feel as a first-time franchisee. First, be diligent when choosing a franchisor. By asking your franchisor numerous questions upfront, you face fewer unwanted surprises later on.
Secondly, choose carefully when hiring employees. While acting as a hiring manager might feel like the least of your worries, you will soon realize that you can only go so far if you don't have a qualified and dedicated team on your side. Lastly, as we've reiterated in this article, ask for help when you need it. Having built-in and immediate support is one of the primary advantages of business franchising.
Take advantage of the services offered by Franchise Recovery to get started on the likely bumpy, but definitely worthwhile, road to success. The right franchise opportunity is waiting for you!
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