10 Reasons Franchises Fail

Do you ever wonder how exactly does a business fail? Where do they go wrong? May 9, 2017

Doubt is the feeling that holds back many people from pursuing something new. But when it comes to business, a healthy dose of scepticism can help you make good decisions. Understanding why a franchise fails can prevent it from happening. There are a lot of possible situations this happens, but we’ve selected the 10 most common reasons. For your ease, we’ve divided them by good and bad franchises. Without a further ado, let’s walk you through this.

Why Does a Good Franchise Fail?

When we say “a good franchise” think of a generally stable business with good work ethics. It doesn’t matter if this business is on the market for a short or long period of time – they work hard and it shows. This overall successful business looks appealing to you and you decide to buy the franchise they’re selling. But something along the line messes up. What could have happened?

1. Lack of trust in the franchise model.

The franchisee stops following the franchise model and starts incorporating their own ideas into the business. This is a huge no-no. Think about it. A franchise is a franchise for a reason. They started from scratch and as they grew they tested what works and what doesn’t. If they’ve impressed you with their success – trust them! This goes both for the things the franchisor tells you to do, but also for the things you should not do. You’ve invested all this time and money for something that’s worthwhile. If their business model didn’t work the company wouldn’t be on that level. If you’re not going to follow the steps, why buy the franchise? You might be more suitable for an entrepreneur.

2. Lack of an ongoing capital.

Sometimes people are so eager to start a new business they dive head-first and forget to be realistic about their expenses. You have to have enough capital not only to get into franchising but to sustain it too. Not to mention your personal and home expenses. Luckily, there are many financial consulting agencies that may help you calculate what are your boundaries. Also, some franchisors provide financial aid, discounts on tools and vehicles or just have a suitable package for your pocket. Just be honest with them.

3. Lack of open communication.

The good thing about franchising is that you don’t need to work in isolation and be completely independent. Share your problems with your franchisor, otherwise, they can’t help you. A good franchisor will always listen to you and help you overcome whatever obstacles you have. Remember it’s in their best interest. If you’re well, they’re well. Communicate often and openly. Teamwork is the best way to go! Lack of communication builds up stress and leads up to a conflict. And nobody needs that.

4. Not the right business sector.

The franchisor is good, the business too, but you don’t feel fulfilled. Why is that? You start thinking about it and you realize that this is not the right franchise for you. Not that it’s bad, it’s just in a business sector that does not suit you. Ending a franchise or switching to another one may sound scary, but people have to know when to quit. Think of it this way: It’s common people to realize after a year or two that it’s time to change jobs. The same can happen with a business. It’s just on a bigger scale.

5. Personal problems.

Last but not least are the personal problems. That is anything that’s beyond your franchisor’s jurisdiction (health, family issues, etc.). However good a franchise business may be, there is no way to prevent these problems from happening. Personal problems in the workplace are probably the biggest challenge of any employer (or franchisor).

Why Does a Bad Franchise Fail?

There are thousands of reasons why a bad franchise can fail. Varying from unethical work policies to miscommunication and lack of training sessions. A business built without a foundation can crumble anytime. Here are the most common problems you may face if you stumble upon a corporation like this.

1. The franchisor generates leads, not bookings.

It’s a common business practice to train franchisees to be salespeople. They have to search for clients and generate the leads themselves. On one hand, it’s not done with a bad intent and it’s a way to train people to be responsible for their income. On the other hand, this takes up a lot of time until you get a result and not everyone is suitable to be a salesperson. Not to mention the franchisees still have to execute the job, manage the employees and so on. The best (and more professional) practice is the franchisor to generate bookings and then pass these jobs to the franchisee.

2. The franchisor and the franchisee don’t work together.

This is similar to “Lack of communication” in “Why a Good Franchise Fails” but slightly different. Here the problem is with the franchisor – they neglect their partners and don’t provide the support they need. It’s important to remember “For yourself, not by yourself”. It’s always more productive to work with people you know and like. The only way to do that is to spend time communicating with each other. If this fails, everything else will go downhill.

3. No training sessions / Insufficient training.

The core idea of a franchise is to be able to have the same service in different locations. Here, training sessions play a crucial role. When the franchisor can’t provide any, the business can’t promise the same standards to the clients. Thus making it hard for everybody. The moment this happens you don’t have a franchise business anymore.

4. Bad location.

Whether you provide home services, like us, or you have a place clients can visit, you have to worry about the location of your business. The franchisor has to make a thorough research in order to know if people in this area need your service. If there is high demand the business will thrive. But if there’s nobody to buy what you’re selling, however good it might be, you’ll be on the losing side.

5. The business is not franchisable.

And lastly, we’ll talk about what it takes to create a franchise. First, you have to have a successful business. Then, it has to have a purpose, brand recognition and it has to be able to provide training sessions. When does this go wrong? Imagine an owner of a small shop or cafe sees an increase in their clients. Then they get the idea of duplicating the shop/cafe around town. The problem is if even one of the above requirements is not covered the franchise can fail.

How Will You Benefit with Fantastic Services Franchise

You will be a part of a proven across the globe franchise model. Read more about us here.
You have options to ease your budget.
You will be able to communicate with us often.
You will get consultations to choose the best franchise business for you.
Even if you have to leave won’t be charged a fee.
You will get booked jobs, not leads.
You will get ongoing support. We’re always ready to help you.
You will get training sessions.
You will have your own area in the city you choose to work in.