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6 Common Mistakes of franchise investor

6 Common Mistakes of franchise investor

Do you know often entrepreneurs fall prey to blind spots or certain mistakes in the franchise industry? Here we will brief 6 mistakes that investors make that will help you contemplate before you take a plunge.

One thing you must bear in mind is the benefits of a franchise business are that its business model is proven with years of experience. This is not for someone who wishes to be a boss or control their own business. In a franchise business, the franchisor has their own business strategies, planning and model. Uniformity has to be followed.

Now let’s see the top 6 common mistakes a franchise investor makes:

Insufficient capital:

Have you done basic research on why franchises fail? Most answers will point to a lack of capital in hand. Bad research leads to forecasting the amount of amount required to start the franchise business. This leads to weak financial conditions and franchisees are forced to lower their standards. This is the first step to destruction.

 Lack of Legal Advice 

In a franchise business, you have a spend a good amount of investment costs, set up costs, and the list goes on during the initial period on many extra investments. Often investors skip understanding each term and conditions of the franchise agreement wherein the many clauses are mentioned including the exit process. A business in which you are committed to investing lakhs or crores and for a long duration should always proceed under the guidance of seasoned legal experts. Never make the mistake of starting in haste. Always consult your lawyer with your plans to get the best insights.

Franchisor Vs Franchisee

One important aspect which should be crystal clear in your mind and thought process is that a franchisor can continue to yield profits from his business or brand even when the franchisee is not performing well. Franchisors earn royalties and margins from their partners. So, basically, a franchisee will be responsible for its own growth.

Free franchises advice

Never fall into the false hands of fraud consultants. There will be multiple people who will try to focus on their commission making you a scapegoat. So never invest in the fancy advertisements here and there. Go for authentic consultants who will guide you to choose the best brands.

Unplanned exit strategy

It is obvious when you start a business, with so much positive vibration and a hectic schedule often the strategy to exit is skipped. But please ensure you plan your exit well under the guidance of your lawyer. It is not intended to demoralise you. Just that it is always wise to plan for the situation if otherwise.

If the exit strategy is not carried out well, the investor ends up owing rent, franchise fees and loan repayments etc.

Not ready to accept changes:

Many entrepreneurs for obvious reasons after days of hard work and passion consider the business to be their own child. However, this attachment often creates a tunnel vision and may not be ready to learn changes in strategy with the latest trend or something that is in demand. And once we are rigid in opening to changes things go really in adverse ways.

    If you feel confident about buying a franchise you may drop us a message so that we can advise you regarding the top and renowned brands which are operating across the country with a high reputation and goodwill.




1) What are the 5 disadvantages of a franchise?

Ans) The 5 disadvantages of a franchise are: 

  1. Lack of flexibility

  2. Less privacy in the financial aspect of the franchise business. 

  3. The rates of expenses are already set

  4. Renewal of the contract is dependent on the franchisor

  5. Exit has to be made with the consent of the franchisor.


2) What is ONE reason that some franchises fail?

Ans ) There are many reasons why a franchise fail.One among them which is most common is misplanning the business strategy for a continuous growth.

3) What are the disadvantages of investing in a franchise?

Ans) Like all business, franchise business too has few disadvantages which you need to be clear before investing.They are- In franchise business you will not have all the control in your hand, you have to follow the rules that has been set by the franchisor, even though you have the best business idea but still you cannot use innovative techniques as the policies are already established.


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