Franchising is a business expansion strategy in which two businesses join hands for mutual benefits. Other expansion strategies include mergers and acquisitions, strategic alliances, amalgamations, partnerships, etc. In the simplest form of franchising, a franchisor grants rights to a franchisee to carry out business on behalf of the former based on an agreed set of terms and conditions. There are other forms of franchising as well. Irrespective of the form, franchising allows businesses to reach out to new geographies and market segments. Other benefits of franchising include quick and economic expansion, focus on core competencies, market penetration, and diversification.

Franchising has been demonstrated as an effective expansion strategy by numerous businesses to become multinational brands. The benefits of franchising in foreign expansion include risk optimization, localization, reduced capital burden, technology-sharing, a synergy of experience and expertise, access to larger market share, vertical and horizontal integration, and better market penetration, etc. However, franchising is exposed to certain pitfalls which if not addressed could prove to be detrimental for both franchisors and franchisees.

Franchising appears to be the silver bullet for achieving growth and expansion and reaching new geographies and segments. Experienced franchise business consultants advocate carefulness and preparedness in implementing franchising expansion. From our experience and expertise in delivering franchise consulting services, some of the most common mistakes encountered in franchising are highlighted next.

Not having a Sound Strategy

The decision to take the franchise route could be driven by many diverse strategic business reasons. For some businesses, it could be to develop existing markets while for others it could be to improve customer experience by greater participation in the value chain. Not establishing the right strategy is the numero uno cause behind businesses failing in the franchise mode even if they are successful without franchising.

A veteran franchise development consultant would raise this question in the first place and you as an aspiring franchisor need to have strong reasons for – “Why should I franchise my business?” The answer to this question provides vital inputs for formulating the right expansion strategy.

Poor Financial and Commercial Planning

Franchising works as long as both parties are mutually benefited in the intended ways. Incorrect assessment of financial and commercial factors can lead to the franchise arrangement becoming a burden for franchisors and franchisees. Preparing a comprehensive business plan covering all the vital aspects of the business including the financial and commercial assessments is as significant in starting a franchising business as it is in the case of starting a new business. If the numbers are not appropriate in the books, the chances of success of the franchise arrangement are also bleak.

Vague Operations Planning

Poor operations planning and lack of operational transparency are some of the most common causes of failed franchising endeavours. These happen when the operational standards and performance expectations are not clearly established with unambiguous agreement on a point-by-point basis. For example, two individuals can agree to grow a tree and share its fruits later. However, if the responsibilities and accountabilities of each individual in the growth and maintenance of that tree are not unmistakably set and agreed upon, the desired fruits are unlikely to come or the tree may not survive long enough to even get there. In franchising, the best way to address this issue is to develop and implement franchise SOPs and make the business process-driven.

Not using Technology for Monitoring and Reporting

A crucial success factor in franchising is trust that operations are being carried out as planned and that the other party is duly playing its role as agreed. Today, monitoring and reporting have been made easier with such features integrated with BPM/ERP applications. Technology plays a big role in helping businesses keep an eye on business operations and fulfilment of the terms and conditions of performance as agreed with attention to detail. Technology also reduces the possibilities of miscommunication and misinterpretations with higher reliability on the accuracy of information and the speed of information-sharing.

Misfit Partners

In franchising, a crucial task is finding the right franchisees. For reputed brands, it may not be difficult to attract applications from interested franchisees. The same goes for franchisees. For example, the biggest brands or the brands in market leadership positions need not always be the best franchise partners for franchisees. Therefore, the challenge for franchisors and franchisees is finding out who is the best fit for their business.

The approach adopted by experienced franchise development consultants here is defining the criteria for selecting a franchise partner based on the requirements of franchising like compatibility of strategies, sharing of capabilities and expertise, and access to resourcefulness.

Loopholes in Paperwork

Having loopholes in the contracts and agreements brought into force under a franchising arrangement is not good for both franchisors and franchisees. In the case of any dispute, these papers serve as a source of reference for reconciliation. Franchise businesses are governed by contracts or agreements between franchisors and franchisees. This paperwork is often an alien task for business owners with only a surface-level understanding of franchise working arrangements. There are also technicalities involved in such paperwork that call for a professional treatment.


Franchising has been demonstrated as an effective expansion strategy by numerous businesses. It appears to be the silver bullet for achieving growth and expansion and reaching new geographies and segments. However, carefulness and preparedness in implementing franchising expansion are highly recommended by franchise experts because of both generic concerns and some common mistakes often made in franchising.

Not having a sound strategy is the most fundamental behind businesses failing in the franchise mode. Faulty assessment of financial and commercial factors can lead to the franchise business becoming a burden. In franchising, the best way to address the lack of operational transparency and build a robust operations framework is by developing and implementing franchise SOPs making the business process-driven. The role of technology should not be undermined in franchising as it plays a big role in helping franchisors and franchisees keep a tab on business operations and performance with attention to detail. Carelessness in the selection of franchise partners is another pitfall in franchising. Having loopholes in the paperwork could leave franchise partners on the wrong sides of a river in the event of a dispute.

To know about our franchise consulting services or if you have any queries for our team of franchise consultants, drop us a message and we will get back to you.