Navigating the business world is tough. There are numerous rewarding experiences that come with being a franchise owner, however, there are also many challenges that appear along the way. Spotting red flags early on can save potential financial loss and wasted time.
For franchisees entering the Kwik Kopy network, we encourage innovation. Success in business is not just about avoiding the red flags, but also embracing a community spirit. We make their business our purpose, ensuring they have the proper tools and support – aligned with our “We Make Possible” ethos. This same mindset applies to any entrepreneur navigating the franchise industry. When they are equipped with the right knowledge, they too can make it possible.
As someone deeply involved in the business world, I’ve seen it all – from businesses that have promising ventures to problematic ones. Here are the red flags every entrepreneur and franchise owner should recognise and address.
Lack of transparency
Transparency is key when it comes to cultivating trust in business relationships. If a franchisor is avoiding sharing critical details, such as financial reports or costs of service, consider this as a significant warning sign. Successful businesses are proud to share their achievements as well as the challenges they are facing. A lack of openness at the beginning can indicate deeper issues.
If requests for detailed reports or operational breakdowns are met with a dismissive response or deflection, it’s a definite red flag. Transparency is more than just numbers – a franchisor must provide clarity on the business background, such as challenges and expectations from franchisees. Without this, individuals are walking into this blindfolded.
Misaligned values
Shared values are essential for a harmonious and productive business relationship. If a potential partner or franchisor’s ethos doesn’t align with your own, conflicts are likely to arise. For example, sustainability that prioritises short-term profits over environmental responsibility may lead to dissatisfaction between stakeholders, franchisees and employees.
Misaligned values can manifest in subtle ways, such as differing priorities around customer service, employee treatment or long-term goals. It is important to have candid conversations with franchisors or partners to ensure your principles align. This alignment fosters a stronger partnership and helps avoid misunderstandings further down the track.
Lack of support from the franchisor
For franchisees, a supportive franchisor is invaluable. Before signing any agreements, access the training, marketing and operational support the franchisor offers. A lack of robust support systems could leave you floundering in the competitive market.
Ask detailed questions about the onboarding process, ongoing training opportunities and the availability of marketing resources. Speak with existing franchisees to gauge their experiences. A franchisor that provides inadequate support may be more focused on selling franchises than ensuring their success. This could leave you isolated and struggling to navigate challenges on your own.
Unrealistic promises
Another red flag to be aware of is the unrealistic expectations and promises which are often the most prominent and attractive within the franchise world. Oftentimes, if the promises seem too good to be true, chances are they are!
However, deciphering whether these promises are achievable and manageable is a key indicator when approaching franchisors or business partners.
When looking at these types of promises, it is key to look for clear and verifiable evidence that backs up these claims. This includes going through performance data, case studies or testimonials from current franchisees. Gather key insights and valuable information before taking the leap of starting the business venture.
Without a clear and actionable plan behind vague or overly ambitious goals, it is crucial to ask details and dig deeper to understand the crux of these unrealistic promises.
High staff turnover
High staff turnover can be a key indicator that can point to deeper issues within a business.
Presented as more of a warning sign, high staff turnover can indicate issues such as poor management, lack of professional development opportunities, and misalignments between employees and company values.
High staff turnover can also point towards a lack of efficient training systems and onboarding processes. Enquire about retention rates, as it may point towards an accurate telling of the overall health and wellbeing of the franchise.
Outdated business models
In today’s fast-paced modern world, industries are constantly evolving and companies must adapt to these changes, or they will be left behind to become “extinct.” An outdated business model can significantly hinder your ability to compete effectively and limit longevity.
Signs of an outdated business model stem from a resistance to change or innovation for relevancy. Without the willingness to invest in new technologies, new marketing strategies or implementing different customer engagement techniques, a stagnant structure can quickly lead to a decline in a competitive edge and market share. To address this, ask questions about innovation and how franchisors incorporate new trends or technologies into the business.
Poor reputation
A poor image and reputation can be the most damaging red flag to watch for, as this fundamental aspect has so much influence on the business’ success. A company’s reputation is easily accessible by researching reviews, feedback and issues to reveal potential problems with quality, service or management. Negative feedback can hinder and tarnish the brand’s image, limiting customer retention and affecting the overall employee morale and culture.
Researching and understanding what is being said about the company, along with how the franchisor is addressing these issues, are crucial to gain a better understanding of a business’ image. If these aspects are not actively being worked on to resolve issues, it could indicate the problem is deeper and could significantly affect a successful franchise journey.
By Sonia Shwabsky, CEO, Kwik Kopy Australia