5 ways cutting corners can hurt the success of your franchise business

Fastfood workers
Franchisees have the luxury of a franchise support system with tools to help navigate the difficulties of running a business.

  • Underestimating startup costs is a one way to create risk for your franchise before it’s launched.
  • Franchisees should tap into the built-in franchise support system for advice on finance and operations.
  • Having a business plan is the best way to cover all the financial and operational strategies for success.
  • See more stories on Insider’s business page.

Becoming a franchisee has immediate advantages that make it an attractive business opportunity for entrepreneurs – established brand/reputation, tried tested and true templates to follow, franchise support services and a pre-existing customer base are just a few of the benefits.

While these are critical components to the success of any business, franchises run a risk of depending heavily on these factors to be successful. The following five ways contribute to a mindset that can cause a franchisee to cut corners within their franchise, hurting their business in the process.

1. Underestimating startup costs

Ensure that you’re covered from a finance perspective. If you’re borrowing to finance your franchise, account for costs like legal fees, rent, payroll, utilities, and debt repayment. Also, factor in the length of time it will take to generate your own working capital to cover business operations. The general recommendation is to plan for a year when determining your borrowing needs. Ask for enough funds to cover the above plus operating expenses for a year as a minimum.

On average, it can take a business upwards of one year before you earn a steady stream of profits. Ensuring that you have the capital to meet all cash flow for operations allows you to focus on learning the business well and navigating the ups and downs of entrepreneurship without worrying about being able to meet your obligations.

2. Not utilizing the franchise support system

Starting a new business is an overwhelming and stressful endeavor, especially for someone who doesn’t have business experience. Franchisees have a luxury that many business owners don’t: access to a franchisor who has created an ecosystem of knowledge to support its franchisees. This is an invaluable tool for franchisees that shouldn’t be underestimated or underutilized. The reality is that at some point, a founder or other franchisee has run into the same problem you may be facing and a possible solution may already exist that you can leverage quickly. Why not tap into a resource like this?

3. Underestimating the importance of reviewing your financials

Assuming that your business will be immediately or quickly profitable is an assumption that carries great risk for a franchise owner. While it is possible, it shouldn’t be expected. A highly recommended practice for franchisees is to ensure that you have a proper financial reporting framework setup where you are reviewing revenue monthly and annually, evaluating profits and operating expenses.

In doing so, you learn the trends of your business location and can develop strategies to adapt to when variables change within your financial reports due to business operations. Creating a financial reporting framework can include adding an accounting system to your resources at startup, or hiring an accountant to ensure that your tools are able to extract the information required to share and evaluate.

4. Underspending on your marketing campaigns

Yes, the franchisee has immediate brand recognition and a pre-existing customer base – but your franchise needs to build up rapport and recognition locally, too. Wherever you choose to locate your franchise, you will meet competition from other businesses that have been successful and others who have established deep roots in the community. A franchise should go above and beyond making its contribution to the corporate franchise marketing fund and ensure that a secondary budget is created to target local customers specifically.

5. Not preparing a business plan

The franchisor covers a great deal of the setup and operation structure for its franchisees, but underestimating the value of a customized business plan that is specific to your needs and that of your community is a great risk. A business plan provides a roadmap to success and clear and succinct information on the critical factors of success. It is also a useful and often required tool for financial and operational expansion.

A typical business plan includes an executive summary, market analysis, management structure, description of product or service, marketing and sales plan, financial projections, funding request, and a general appendix.

Opening a franchise is a great opportunity for an entrepreneur to get into business and build upon an already successful and reputable brand. Take careful consideration in how much you plan to go above and beyond with your franchise to ensure its success by treating this business the same way you would if you were building from the ground up. In doing so, your business will only come out stronger and wiser.

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Subway will bring back roast beef and rotisserie chicken after months of demands from franchisees and angry customers

roast beef
Subway’s roast beef will return to menus this summer.

  • Subway will bring back its roast beef and rotisserie chicken this summer, sources told Insider.
  • The two sandwiches disappeared last year, to the dismay of some customers and franchisees.
  • “Who has a deli shop without roast beef? I mean, it’s ridiculous,” said one Subway franchisee.
  • See more stories on Insider’s business page.

Subway is bringing back its roast beef and rotisserie chicken sandwiches.

The deli staples are finally returning to the menu this summer after disappearing last June, two sources with direct knowledge told Insider.

A Subway representative said in an email to Insider that while the chain “can’t unpack all the details just yet, we can confirm that fresh, exciting changes are coming for Subway fans. We look forward to sharing more with you soon.”

When Subway got rid of the sandwiches last year, it was a top-down decision that some operators questioned, according to a veteran Subway franchisee operator from California who wished to remain anonymous.

“Plus who has a deli shop without roast beef? I mean, it’s ridiculous,” the franchisee added. Subway blamed the menu cuts on the pandemic, the franchisee said.

Customers and franchisees have questioned Subway’s strategy

Subway was among many restaurant chains like McDonald’s, Panda Express, and Taco Bell that trimmed menu items during the early days of the pandemic.

But when restrictions lifted in various parts of the US, Subway operators wanted to bring back the two sandwiches to appease consumers, who were demanding the return of the two premium subs on social media.

“The customer reaction was horrendous,” the franchisee said. “People were pissed off that those two items were gone. You would think that they would bring them back faster, but they didn’t. But finally, this year, they said they are bringing them back.”

“I won’t eat at Subway again until they bring back Roast beef,” reads one recent comment on Subway’s Facebook page. “I thought it was a temporary thing but the restaurant I was at today said it was a forever thing. So I said that’s the stupidest thing I heard today. I canceled my order and walked out.”

The decision to ditch rotisserie chicken and roast beef is not the only strategy that franchisees say has come from the top without support from the operators that own 100% of Subway locations across the US.

Last June, many franchisees refused to participate in a heavily-hyped two-for-$10 sandwich deal. Franchisees told Insider they have also pushed back on the company’s decision to require stores to pre-pandemic hours of operation, despite sales slumps and difficulty staffing locations.

Some franchisees blame CEO John Chidsey, who was hired in November 2019, for the top-down approach.

“He doesn’t really communicate well with franchisees,” a second franchisee told Insider. This source also asked to remain anonymous as this person was not authorized by the company to speak to the press. “It’s obvious that he thinks franchisees are his employees.”

Are you a Subway franchisee or employee with a story to share? Email ktaylor@insider.com and nluna@insider.com, or get in touch via the Signal encrypted messenger app at (646) 768-4740 or (714) 875-6218

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