Common mistakes when setting up a franchise

Anyone who secures partners before the concept, services and processes have been clarified is selling a system that has not yet been properly defined.

Many new franchise systems are keen to expand rapidly. If the recruitment of franchisees begins before the franchise concept, the services provided by head office, profitability, the franchisee profile and the onboarding process have been sufficiently clarified, this will lead to additional work, uncertainty and conflicts later on.

A better approach is a sales process that is planned at an early stage, but where active selling only begins once the key foundations are in place. This includes clear information packs, a realistic assessment of the development stage, and transparent statements about what is already working and what is still being developed.

If you wait too long, you’ll soon find yourself under pressure in terms of time, growth or finances.

Starting too late can also be problematic. If business development only begins once liquidity, expansion targets or internal expectations are already creating pressure, the risk of having to make compromises increases.

Partner acquisition requires advance planning. New organisations often have lower brand awareness, fewer channels, a smaller budget and less experience with the selection process. That is why the acquisition process should be prepared well in advance – with a partner profile, channels, information packs, decision-making criteria and a clear process.

Enthusiasm is important – but it is no substitute for a structured recruitment and selection process.

The first prospective clients often feel particularly valued. This is precisely why there is a high risk of making decisions based on personal rapport, a sense of excitement about new beginnings, or gut instinct.

Effective partner acquisition requires clear minimum requirements, defined steps in the discussion process, decision-making criteria and thorough documentation. A good feeling can be an important indicator – but it should never be the sole basis for a decision.

If personalities, values or working styles are not a good fit, it usually ends up costing a lot later on – both financially and culturally.

A common mistake is to downplay warning signs simply because a candidate is keen to join the company or the first role needs filling urgently. If there is a mismatch in personality, values, willingness to adapt to the system or working style, this often leads to friction, frustration and a loss of motivation later on.

Building a professional franchise means taking your partner profile seriously. Having the courage to turn down candidates protects the system, the brand, the head office team and the candidates themselves.

Special terms may help to close a deal in the short term, but can undermine the system’s logic in the long term.

Particularly with the first partners, there is a strong temptation to negotiate entry fees, ongoing charges, territorial protection or services provided by head office on a case-by-case basis. Making too many concessions can later lead to unequal treatment, financial problems and difficult disputes.

Compromises are possible, but they should be made as a conscious decision, documented and compatible with the system. It is important that the fee structure, the services provided by head office and the partners’ financial viability continue to be aligned.

Unrealistic expectations undermine trust, funding and future collaboration.

As the project is still under construction, many aspects are still in the development phase. It is therefore particularly important to be honest about what has already been completed, what is still under construction, and what the next steps are.

Overly ambitious sales forecasts, vague service promises or overly optimistic statements about market trends can lead to disappointment and disputes later on. Transparency is part of professional pre-contractual disclosure and protects both parties.

A franchise partnership needs to be a good fit. If you find yourself having to persuade someone, it usually means you haven’t thought things through properly yet.

A franchise system should attract suitable partners, not persuade them. If candidates are recruited solely through pressure, discounts or exaggerated promises, there is often no solid foundation for a long-term partnership.

Effective partner recruitment makes the benefits, requirements, cost-effectiveness and expectations clear. It gives both sides the space to make a clear decision – including the option to say no.

Not everyone who is interested is a good franchise partner.

A common mistake made by new franchise systems is to mistake interest for suitability. Good franchisees need capital, motivation, a willingness to learn, the ability to work within the system, a good fit with the company’s values, and entrepreneurial resilience.

That is why the selection process requires clear minimum criteria, a structured self-assessment, discussions on financial viability, and sufficient time for both parties to get to know one another. When choosing initial partners, quality is more important than speed.

Getting off to a quick start, experimenting or generating cash must not take precedence over long-term sustainability.

Start-ups are often under pressure: they want to prove that their concept is scalable, secure their first partners and generate revenue. If short-term goals take precedence over partner quality, standardisation and financial viability, this will later lead to dissatisfaction, frustration and a negative impact both internally and externally.

Building a franchise requires speed – but not at the expense of the quality of the system. It is crucial to have a system that can be managed professionally even after the first deals have been concluded.

Partners need to understand what the head office is currently doing – and what is still to be developed.

In new systems in particular, many services are still being developed. This is not necessarily a problem, as long as it is communicated clearly.

The situation becomes problematic when partners do not know exactly what support they can expect, which services are already available and which will only become available at a later date. Clear service descriptions protect both parties and help to ensure that fees are transparent.

If revenue, costs, the start-up phase or the owner’s salary are planned too optimistically, pressure builds up early on.

A franchise system can only grow if the model remains financially attractive to franchisees. Often, estimates of revenue growth, staff costs, the cost of goods or materials, local marketing costs, financing, start-up losses or withdrawals for personal use are too optimistic.

A more effective approach is to carry out a realistic assessment of a partner’s financial viability, incorporating scenarios, liquidity analysis and a clear classification of the assumptions. This protects partners, head office and the brand from disappointment later on.

Without clear processes, every prospective client and every new partnership becomes a one-off case.

A lack of established routines is normal in new systems. Nevertheless, lead generation, selection, information packs, decision-making criteria, onboarding and the first steps towards automation should be structured at an early stage.

Digital tools can help you organise your contacts, tasks, the status of discussions and documents in a structured way. This not only helps you secure your first partner, but also ensures you get off to a professional start.