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  July 7th, 2020 | Written by

Top Five Challenges Facing Franchise Owners Today

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  • As with other growing businesses, the franchising industry faces its own unique set of challenges.
  • Your employees are the greatest asset in your business.
  • One of the many reasons why businesses fail is because of insufficient working capital.

Owning a franchise system is a dream come true for some entrepreneurs. But with different franchising ideas constantly popping in, it can be difficult to establish a brand that’s both sellable and unique.

Even if you’re bold, fearless, and a big risk-taker, it isn’t enough to ensure the success of the business you’re trying to build. However, a start-up franchise business loan will come in handy and will also help you grow your franchise company.

As with other growing businesses, the franchising industry faces its own unique set of challenges. At one point, some companies may experience rapid growth only to end up hitting a wall when it comes to expanding their brand. Sometimes, the challenges in the franchise business can be foreseen, but they can also catch entrepreneurs by surprise.

Here are 5 of the challenges facing franchisors today:

1. Lack of Working Capital

One of the many reasons why businesses fail is because of insufficient working capital. Although the road to success for a franchise business might seem easy, it’s not going to work if you don’t have proper financing. The first few years in running a franchise are usually the hardest. Aside from the fact that you’re still learning the ropes, you also have to deal with expensive start-up costs.

If you’re starting a franchise business, you’ll more than likely have to employ the help of some professionals. Franchise consultants, lawyers, branding experts, and other important people need to be on board to ensure the success of your franchise business. So, be sure that you have adequate financing that will cover fees.

In the franchising industry, it’s always important to remember never to underestimate the costs. Franchisors should generate enough revenue to support infrastructures, marketing campaigns, business operations, as well as other important finances.

Since it could take years for the franchise business to generate enough cash to support the business structure, entrepreneurs should have enough capital to self-fund the business until it reaches that point. Oftentimes, they will take out a franchising business loan to manage the costs.

2. Untrusting Franchisees

Because of the increasing negative opinions regarding franchises, a lot of potential franchisees are having doubts about following this route for their own brand. As a result, they end up questioning the motives and strategies of a franchising company. This can easily become a distraction and a major obstacle in the growth of a franchise company. Because of that, their performance becomes limited and it can undermine the process of a growing company.

As a franchisor, you can prevent this from happening. For one, don’t leave your franchisees wondering. Provide the necessary information that is needed, eliminate any misunderstandings, and be sure to quickly address all questions as honestly as you can.

Also be transparent with your processes, as well as the ways on how you reached where you are today. Be sure to include your franchisees in every business decision, so your motives and actions will not be viewed as self-serving.

3. Finding the Right Franchisees

It’s a no brainer that the success of a franchise business largely depends on the quality of their franchisees. To become a franchisee, interested entrepreneurs have to go through a number of processes, with due diligence being a must. However, there are also times when the franchisors become desperate, especially when cash flow is tight.

When this happens, they accept a franchisee and skip the recruitment process. In times such as these, franchisors must remember that quality is always better than quantity.

When starting a franchise business, franchisors must build a reputable network. They should always build and maintain a strong relationship with their franchisees. Remember that the word of an existing franchises is important in finding recruits for your business. So, the happier they are, the better it will be for the growth of your company.

4. Hiring the Right Team

In starting any business, the entrepreneur must be able to identify the company’s strengths and weaknesses. Once this is known, they will then know what type of people they should hire in order to bridge the gap and eliminate weak points.

Your employees are the greatest asset in your business. As a growing company, the odds are high that you’ll need to interact with your staff from different departments. Ideally, you should be sure that you’re all working towards the same goal. As such, you need to instill the company’s culture in your employees and take steps that ensure they embrace it, as well.

5. Adjusting to Becoming a Franchising Company Owner

Although it may sound simple to some, becoming a franchisor is the biggest challenge of running a franchising company. An entrepreneur might be used to overseeing the day to day operations of a business, however, when one decides to franchise their business, a whole new set of concerns arises.

A franchising entrepreneur should possess the qualities of a good leader. They should also be able to motivate and inspire their employees and franchisees, so they too, can adapt to the role given to them.

Aside from that, the franchisor should learn how to hold back in the management of their business operations. By hiring the right management team, the franchisor is able to free up time which they can use to focus more on business’ growth and expansion. They have to make concerted efforts to not to make any crucial franchising mistakes in order to avoid a business failing.

Need Start-up Franchising Business Loans for Your Growing Franchising Company?

Running a franchising company is a challenging undertaking. That’s why you need a strong support system as well as the right funding in place that can help your business survive. At some point, you’ll eventually need additional financing support in order to keep your business afloat. So, be sure to secure the right start-up franchising business loans for your growing business.


Ramona Smith is a staff writer for SMB Compass. She loves to enjoy spending time with her family. She loves to going out and explore new moments whenever they came to light. Ramona discovers satisfaction in investigating new subjects that help to extend her points of view. You can frequently locate her covered in a decent book or out searching for an experience.