Top Six Reasons why Franchisees Fail

1. Failure to select a franchise system that will succeed. (See “Top 10 Reasons why Franchise Systems Fail” blog)
2. Failure to do their due diligence with respect to the franchise system and the franchisor’s management. Has the franchisor fully developed the franchise system or does it have a “to be developed” training program or operating manual? Can and will the franchisor provide the training and expertise to operate, develop and maintain the franchise system that you lack? Is the franchise system a proven concept or are you getting in on the “ground floor?”
3. Failure to select a franchised business that is a good fit for them. Do you enjoy what you will be doing? Do you have the appropriate aptitude and demeanor for the business? Are your financial, operational and other expectations reasonable? Are your financial, operational and other expectations consistent with financial, operational and other realities? Talking with existing and former franchisees can provide you valuable information.
4. Failure to understand that the franchisor will not run the business or guarantee the success of the business. Although franchisors are responsible for providing the tools to assist you succeed, it is your responsibility to select the site and operate the franchised business by following the franchise system’s requirements and consistent with sound business practices.
5. Failure to follow the franchise system’s requirements. Do you have the “franchisee mentality?” If that the franchise system is a proven concept, its success is attributable to the policies and procedures adopted by the franchisor. Failure to follow them may lead to failure of your franchised business and will likely lead to an acrimonious relationship with your franchisor. Your franchisor may even terminate your franchise rights.
6. Failure to properly capitalize the franchised business. It takes money to make money. Undercapitalizing a business is a sure way to waste your time and any assets that you do invest.