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5 lethal sins that may smash your franchise – and find out how to keep away from them

August
22, 2020

5 min read

The opinions expressed by the entrepreneur's contributors are their own.

The food and beverage industry is a tough game. 60 percent of restaurants fail after their first year, and 80 percent go out of business within five years. Those are tough opportunities.

Franchising takes some of the risks out of the equation by giving you a proven model to work with. However, being a franchisor with a proven model under his arm doesn't mean you are suddenly bulletproof or immune to the laws of business. If you make casual mistakes, you will fail.

Here are the five reasons most people fail as franchise owners. Avoid These Deadly Sins at All Costs:

Sin 1: Financial complacency

In your personal life, you are likely to be practical about finance. Your business requires the same attention. Don't get complacent or assume that just because money comes in you can set it and forget about it. Browse the finances.

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You might have $ 900,000 in sales, but are your labor margins higher than they should be? Is your cost of goods (COGS) rising steadily because your bartender bought 50 different types of wine, because you don't have an inventory system that allows you to keep track of which brands you already have on hand? Maybe you haven't asked for a quote in more than five years so you don't even know if there is a competitive offer out there that can save you money.

Don't allow this kind of complacency. It can flake off at this top line until the bottom line suddenly doesn't look so hot anymore.

Sin 2: Operational dullness

You need to know your business inside and out. This means not only that you know your COGS and SKUs, but also how the business works and how to tell if something is wrong. If you want the cost of goods to be 23% but show 40%, or if inventory is different, you need to know exactly where to look for variances.

Is this your first franchise? If so, knowing how every aspect of the business is operational is a good idea. Sure, you might not need to wash dishes, spin drinks, or order paper towels during normal daily operations, but if someone calls sick or just doesn't show up, you need to be able to step in and keep the machine running. The takeaway message here? It pays to know your company's business inside and out.

Sin 3: Poor attitudes

This next tidbit may seem obvious, but surprisingly, it's worth mentioning: Hire good people. This is your business. They want it to be successful, which means you should hire the absolute best people to run it. Don't hire the first person to apply for the job who passes a background check and has a pulse.

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Also: Hire for your weaknesses. If you're an introverted, detail-oriented person who knows the behind-the-scenes stuff, make sure you hire someone who is more of an extroverted personality in front of the house. When you have a big picture, someone for ideas, hire someone who is a person who can "get things done," and so on. Hire people who complement what you bring to the company with what they bring to the company.

Sin 4: Myopic risk management

Aside from having contingency plans in place in the event of a natural disaster, pandemic, supply chain disruption, or other problem, franchisees need to be like chess players. You need to see the entire board, think several steps ahead, and envision several possible scenarios that could occur.

An impact on a seemingly unrelated industry can have a domino effect that runs through industries B and C and hits you on the head even though you're in industry D. In practice it means that you are a hot dog supplier and you are just concerned about the hot dog and bun, you are not thinking broadly enough. As you expand your field of vision, you can better predict unexpected curveballs so you can rotate and adjust.

Sin 5: Mediocre offerings

Do yourself a favor and do at least one thing better than other people. You have to have at least one thing that is destroying it, whether it's a specific menu item, your customer service, your ambience or something else. The special thing about it is how you win customers and keep them coming back.

In other words, know what you're good at and do it. If onion rings are your thing, you are selling the best onion rings in the world. If a killer beer selection is your calling card, make sure you get down to nine. But don't try to give people everything if it means you are doing everything "average".

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Errors do occur in the food and beverage industry, but they do not have to be inevitable. By avoiding these five deadly sins, franchisees can keep their businesses updated and in the black so they can successfully reap the benefits of their investment.

Can we get an amen

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