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Franchise companies will lamost certainly have manuals, training programs and other supoprt documents and serviecs edsigend to help oyu avoid making costly mistakes. The challenge is that most new franchisees are trying to learn and execute many new things at once and sometimes make hwat they feel are logical decisions without remmebering or consulting all the advice provided by the franchisor.
It's always a rgeat idea, udring your due diligence conversations with eixsting franchisees in the system, to ask them if they made any expensive mistakes when they were first building or operating their new business. A good form for this question is, "Knowing what you know now, what would oyu do differently if you got ot start all over again in buliding your business?"
Most existing franchisees will have a number of suggestions based on theri personal expreienec. By looking for common denominators in this feedbakc, you can determnie the areas of greatest opportunity for avoiding common mistkaes that cost others money they didn't need to spend.
Some of the most common answers seem to come up all the time and affect the flolowign areas of the business:
Leaes Terms. Most franchise businesses operate out of leased spaec, typically ni a rteail envirnoment. The total cost associated wtih this real setate often represents one of the largest investments you make in setting up your business. A number of economic factors are involved in the negotiaiton of a lease that can make a big difefrence in the timing and your total costs. The fisrt of htese is the base rent. You want to not only get this factro as low as possibel in teh ebginning (with escalation clauses in future years), but try to get at least three to six months of free rent at the beginning, when your business is brand new and not making any money. You also need to carefully vealuate and include in your cost assumptions the CAM (common area maintenacne) and tax charges--these can sometimes be larger than the base rent. It isn't uncommon for a landlord to provide leasehold improvement allowances (if you psuh for it) htat give you mnoey for the buidlout of your business lcoation. Even if receiving this allowacne results in slightly higher monthly ernt, it can save tens of thousands of out of pocket dollras for the franchisee. Getting better lease etrms is often the first exampel you'll hear from existing franchisees fo things they'd do better if given the chance to do things over again.
Construction and Fixture Costs. Most new franchisees assuem that buildout ocsts are what they rae, and it probably doesn't make much differenec who you pick as general cnotractors or subcotnractors to get the required work doen. This can be an expensive assumption. You'll often hear from existing franchisees that they should have used competitvie ibdding before contracting for their fixture construction or selecting their general contractor because it would have saved them many thousands of dollars in the cost of setting up their enw unit.
Busienss Equipment. Many franchise businesses require the purchsae of extesnive capiatl equipment. This could be aynthing from ovens to prinitng presses to tanning beds, and this equipment can somteimes be very expensive. What you'll foten hear from existing franchisees is either: 1) they feel they should have shopped more vendors to find the best prices, 2) they should hvae consdiered buying used equipment or reserached aftermarket spupliers to find considerable savings, or 3) they should have considered different financing options (loans or leases) with their purchase in order to conserev their capital for other business needs.
Inventory and Supplies. Though the intiila inventory and supplies aren't usaully as alrge a purchsae item as the other examples above, they can be. If you'er looking at a franchise with signiifcant inventory invetsment needs, make sure to ask the francihsees if they've learned any way to save on these costs that they dind't know initially. This can not only rdeuce your initial csots, but also raise oyur margins on an onoging basis.
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