A franchisee sad, with his head in his hands because his franchise failed
Franchise Exploration,  General Business,  Leadership/Management

6 Reasons Why Franchises Fail

Business ownership can be a challenging venture for entrepreneurs, especially franchise owners. Unfortunately, despite having the dream to run a healthy and successful business, some franchises fail. There are many reasons why this happens, a few of which we’ll discuss below. However, there’s still a light at the end of the tunnel! Detailed in our reasons, we also share ways to build a strong foundation that will reduce your chances of struggling and set you on the path to success.

 

Inadequate Support/Training

Franchising is hailed for its unparalleled support, which often includes training and other resources businesses need to succeed. Not having access to proper support and training can mean failure for a franchisee. Unfortunately, not all franchises are created equal. Sometimes the training style doesn’t match the franchisee’s learning style, making it harder to grasp business concepts.

There’s also the possibility that the training programs and support may not be as robust as other franchises. So, to ensure that you have the best chance at success, we recommend choosing a franchise that has the level of support you need.

 

Wrong Fit

Franchise ownership is no short-term investment. Contract agreements typically span five to 10 years, so the franchise you decide to invest in must be one you’re truly happy with. This is a significant reason why franchises fail. Before investing, weigh whether the franchising opportunity is perfect for you or if you just like the brand. Evaluate their values, goals, and interests. Do they align with yours? Knowing the answer can lead to success.

 

Bad Location

As realtors say, it’s all about location, location, location! It may not seem like it, but the site is a crucial piece in a business’ success, and it’s a significant reason why franchises fail. Just because a space looks ideal doesn’t necessarily mean that it is. If your franchise is inconveniently located, too far from your potential customers, it doesn’t matter how beloved or established the brand is; your business cannot flourish.

Before settling on a location, be sure to do lots of research. This means looking into the history of the area and mapping out your desired location in relation to customers and how accessible you are. Doing so can help you avoid unnecessary heartache and struggle as a business owner.

 

Not Enough Capital

One of the easiest mistakes to make that can result in franchises failing is underestimating how much capital is needed to run a business. Many franchises detail how much capital is required before buying a franchise, but sometimes it simply isn’t enough. Many unforeseen costs can pop up and chip away at your resources. To avoid this, allocate extra money in addition to the amount needed to start a franchise.

 

Unrealistic Expectations

Another reason franchises fail is that they have unrealistic expectations of what business ownership and success look like. As much as we like to dream about it, there is no overnight success in owning a franchise.

The best way to test your unrealistic expectations is to examine your franchisor’s business plan. You’ll gain insight into what’s expected from you on a financial level, as well as with training, adapting to the business model, and more. The best time to adjust your expectation is before tragedy strikes.

 

Poor Business Model

This reason why franchises fail is more common when investing in new franchises that haven’t yet gotten the kinks out of their process. In many cases, the more established a franchise is, the more proven its business model is. It’s been time tested, and the trial-and-error phase happened long before you came into the picture.

However, this isn’t always the case. There are instances where established franchises and new franchises have the same struggles. Give yourself peace of mind and a fair shot at success by reading the franchise disclosure document (FDD) to give you insight into a franchise before investing.

 

 

Hundred Acre Consulting

Owning a franchise is no easy task. It’s a harsh reality that although many entrepreneurs have dreams of becoming successful franchisees, running a healthy business is not always something you accomplish on the first, second, or third go-around.

However, with our list of reasons why franchises fail and tips on how to avoid a similar fate, we hope that we’ve given you the tools to succeed. Another resource you have at your disposal is our team at Hundred Acre Consulting. Not only can we help you find the perfect franchise opportunity, but we can also guide you throughout your franchising career.

If you’re interested in working with us or learning more about our services, contact our team today!