There is no risk-free business. Even established brands who had been in the market for decades face difficulties at some point. While franchising offers you a more natural way to start a business, it doesn’t exempt you from encountering challenges. You will need the help of a franchise consultant to guide you through the tough episodes. Here are some of the difficulties that franchisees usually face in managing their business:
1. Maintaining a healthy cash flow
Sales and profitability do not solely determine the success of running a business. Although one of your goals as a franchisee is to sell your products, managing your cash flow is equally important. In a recent survey, maintaining adequate financing or cash flow is among the key challenges that small business owners deal with. 69% of these owners stay late at night, trying to figure out how to resolve their cash flow issues.
As a franchisee, you need to have proper financial planning to support your business during downturns. When your working capital is not anymore sufficient to run the company, you will be forced to turn to loans from financial institutions. Instead of solving your cash flow problem, you might be creating more significant economic issues because of high interest rates.
Prevent yourself from the desperate move of getting loans by closely monitoring the cash that flows in and out of your business. To effectively manage your cash flow, you need to do careful spending, maximizing the productivity of your current employees, and providing your customers with secure payment options.
2. Employee Management and Retention
Keeping your reliable and trusted employees is an integral part of a regular business operation. But employee retention is still a daunting challenge to franchisees. As a result, they spend more on the recruitment and training of new employees.
There is no single formula for customer retention, as some of their decisions are influenced by personal goals (And that’s something that you can’t control). However, some employees decide to quit their jobs because of factors that you have control over. Delayed salaries, absence of reward or recognition system, reduced wages, and lack of health care benefits are just some of the reasons for employee attrition.
Respect your employees and be sensitive about their needs to create a satisfying culture for them. Remember that happy employees equate to satisfied customers. And ultimately, a healthy business.
3. Rental cost
Increasing rental costs is also a significant challenge for franchisees. The money you spend monthly on your rent can have a substantial impact on your business’ financial health. If you own a small business, it is best to downsize your space to cut on the rental cost.
Choose a commercial space that is not extraordinarily populated or consider subleasing. The sublessor or the original tenant might have a spare space in his rented commercial building and want to have it monetized. Subleasing a space is a cheaper option when you are just starting your business.
Just like any other business, franchising is subject to both unpredictable and expected challenges. Prepare for these challenges so that you don’t have to spend your late nights worrying about the uncertain future of your business.