Franchising a Franchise? Learn From Our Mistakes

In 2005, my husband and I bought a food cart franchise for 200,000 pesos and paid 150,000 for the right to operate in a big Manila mall for nine months. We shelled out some more for additional equipment and supplies, increasing our total investment to almost 400,000.

Our franchise lasted for only two years, and we never recovered our investment. It’s painful going back to where we lost a lot of money, but I hope this can help others, and heal some of my hurt as well.

We had lots of mistakes, and some of the biggest were the following:

1.  We chose a franchise that was only 11 months old. I knew that we were taking a big risk in paying for a new brand name, but we were blinded by the fact that the franchise attracted almost 50 franchises in just a few months, including some celebrities. About two years after we closed, the franchise closed shop.

2.  We failed to see that the franchise used ingredients prone to big price increases. Eggs, butter, meat products, processed flour — they all shot up in prices. We could not adjust the prices because the affordable price was one of the main attractions of the products.

3.  We didn’t know that the main cooking device was an electricity guzzler. The electric bill became our monthly horror story.

4.  Early on, we targeted only malls. We failed to see that there were locations outside the malls with the targeted traffic and lower rents. When we found out one, we could no longer get out of our mall contract without forfeiting our big deposit. During those times, it was so hard passing by a location I previously rejected, and seeing people line up to buy from another franchise.

5.  We made wrong assumptions about mall traffic. Before signing the mall contract, we should have returned to the mall on different days and checked whether people were coming in and what people were buying for snacks or meals.

6.  We made our exit too late. We could have cut our losses had we not held on to false hopes and not renewed our contract with the mall.

I decided not to publish the name of the franchise for certain reasons.  Anyway, the franchise has closed shop.  What are important now are that we learned from our mistakes, that we were able to rise from our fall with help from God, and that we hope others may learn from our mistakes.

 

Posted in Small Business | Tagged , , , | Leave a comment