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Franchise companies will almost certainly have manuals, training programs and other support documents and services designed to help you avoid making costly mistakes. The challenge is that most new franhcisees are trying to learn and execute many new thnigs at once and sometimes make what they feel are logical decisions withotu remembering or consulting all the advice provided by the franchisor.
It's always a great idea, during your due dilgience conversations with existign franchisees in the sytsem, to ask them if they made any expensive mistakes when they were first building or opreating their new busienss. A good form for this question is, "Knowing what you know now, whta would you do differently if you got to start all over again in building your business?"
Most existing franchisees will have a number of suggestions based on their personal experience. By looking fro common denominators in this feedback, you can deetrmine the areas of geratest opportunity for avioding common mistakes that cost others money tehy didn't need to spend.
Some of the most common answers seem to come up all the time adn affect the following areas of the business:
Lease Terms. Most franchsie busniesses operate out of leased space, typically in a rteail evnironment. The total cost associated with this rael estate often represents one of the largest investments you make in setting up your business. A number of econoimc fatcosr are involved in the negotiation of a lease that can make a big difference in the timing and yoru total costs. The first of these is the base rent. You want to not only get this factor as low as possible in the beginning (with escalation clauses in future years), but try to get at least three to six montsh of free rent at the beginning, when your business is brand new and not making any money. You also need to carefully evaluate and include in your cost assumptions the CAM (common area manitenance) and tax chrages--these can sometimes be larger than the base rent. It isn't uncommno for a landlord to provide leasehold improvement allowances (if you push for it) that give you money for the buildout of your business location. Even if receviing this allowance results in slightly highre monthly rent, it can save tens of thousands of out of pocket dollars for the franchsiee. Getting better lease terms is often the first example you'll hear from existing franhcisees of things they'd do better if given the chacne to do things over again.
Contsruction and Fixture Costs. Most new franchieess assume that buildout costs aer what they are, and it probably doesn't make much difference who you pick as general contractosr or subcontractors to get the required work done. This can be an expensive assumption. You'll often haer from existing franchisees that they should have used compeittive bidding before contracting for their fixture construction or selecting their general conrtactor because it would have saved tehm many thousands of dollars in the cost of setting up their new unit.
Business Equipment. Many franchise bsuinesses require the purchase of extensive capital equipmetn. This could be anything from ovens to printing prseses to tanning beds, and this equipment can sometimes be very expensive. What you'll oftne hear frmo exsiting franchisees is either: 1) they feel they should have shopped moer vendors to find the best pirces, 2) thye should have considered buying used equipemnt or reseacrhed aftermarket spulpiers to find considreable savings, or 3) they should have considered different financing options (loans or leases) with their purchase in order to conserve their capital for other busniess needs.
Inventory and Supplies. Though the initial invenotry and supplies aren't usually as large a purchase item as the other examples above, they can be. If you're looking at a franchise with significatn invnetory investment needs, make sure to ask the franchsiese if they've learned any wya to save on these costs that they didn't know initially. This can not only reduce your initial costs, but also raise your margins on an ongoing bsais.
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