What to Expect in Your First Year of Franchising

First-time franchisees aim to be as prepared as possible for the opening of a location, but the initial year may still be an eye opener. To offset some of these surprises, 1851 spoke with franchisees – both new and experienced – to gather five critical obstacles they faced in their first year in business.

Financial Responsibility

Without a doubt, keeping finances straight is the No. 1 obstacle our sources faced. Casey Erickson, who opened his Which Wich Superior Sandwiches last year, regrets waiting until his doors were open to hire an accountant and sort through his funds.

“We were overwhelmed,” said Erickson. “At the beginning it seems so important to only focus on your staff, food and labor costs, but we hadn’t even looked into all the paperwork we needed to file our taxes or write-offs.”

Hand & Stone franchisee Guillermo Ortega is planning to open his second location this year. What he learned with his first spa is that staffing—especially for an appointment-based brand—can come at a higher expense when the doors first open for business.

“When you open a business that runs off of appointments, you realize your books aren’t going to be filled right away, yet you still have to pay your team for those nonservice hours,” he said.

Marketing Challenges

In Erickson’s case, his Which Wich opened in an area where the next closest franchise was 45 minutes away, so marketing was crucial. Advertising is difficult on a limited budget, but he looked to fellow franchisees and competitors to see what worked and built a strategy from there.  

It’s also important to know and understand your demographic.

“We were approached by a lot of different groups looking for us to advertise, and we ultimately made decisions based on our target market, because not everything is going to fit.”

A demographic tool Ortega began to utilize is one we’re all familiar with: Facebook. He insists on utilizing the social media platform to help with business relevance and understanding trends.

Staffing

Franchisors advise that franchisees hire a certain amount of people—a number that Erickson thought was astronomical at first. He now admits to underestimating that number, after witnessing firsthand that a restaurant may lose roughly 60 percent of its staff within the first year. Because employees will likely come and go, Erickson believes it’s important to hire an ample amount of staff to fill in the gaps when necessary.

Underestimated Costs and Keeping Expenses Low

Upon signing for a franchise, business owners look to the FDD to gauge the average costs. But with experience comes knowledge, and first-time owners don’t always realize the small, extra costs that add up. A business is like a home; there are utilities that need constant monitoring. Erickson learned to set his lights on stricter timers and keep an eye on the thermostat when the business is empty. He also makes sure there are no back doors open during peak business hours.

Time Commitment

Owning a franchise is a full-time job, and some owners underestimate the time it takes to get the business up and running. Erickson, who operates his Which Wich with his wife Joanna, says they spent every day in the restaurant from open to close for the first six weeks.

Ortega, who also operates with his wife Monica, says it can be hard for some to leave work behind when you close up shop for the day.

“It’s a massive change in your personal life,” he said. “Before, I worked in corporate and my wife was raising our children. Now we work together and ownership is our livelihood, but we try not to talk about business at home.”