Articles
Top 10 Reasons Why Franchise Systems Fail
By: Susan E.
Wells
- Failure to have a concept that works or is unique, special or
cannot be copied by others. What is the "secret sauce?"
Are there any patented products? Is there any proprietary
information? Can anyone replicate the business or are there
significant barriers to entry?
- Failure to have a concept that can be copied by others.
Although this sounds contradictory to the first point, can the
business be replicated by franchisees or is it too complicated or
dependent upon the franchisor's personal connections, skills or
personality?
- Failure to have or develop a strong brand name. Does the
brand name convey the nature of the business? Is the brand
name perceived positively? Can it be registered as a
trademark?
- Failure to fully develop the concept and implementation and to
work out the kinks. Franchisees purchase franchises to obtain
the guidance and support that they need to establish and operate
the business and to avoid the mistakes that they would make if they
were starting their own businesses without affiliation with a
franchise system.
- Failure to have a financially successful business. Is it
a proven concept (financially viable) over a period of time?
Can it support the additional financial obligations of the
franchise system, such as the franchise fee and royalties?
- Failure to "select" franchisees. Is any potential
applicant granted a franchise or does the franchisor select
franchisees with a likelihood of success?
- Failure to support franchisees in connection with starting the
franchised business. Frequently franchisors talk in terms of
being partners with their franchisees. A phrase commonly used
by franchisors is that the benefit of buying a franchise is that
you are in business "for yourself, not by yourself." However,
in some franchise systems, that is only lip service.
- Failure to continuously develop the franchised concept and
provide continued support for the franchise system.
Franchisees are frequently frustrated with the lack of fresh
business, marketing and other ideas from the franchisor over the
course of time and wonder why they are continuing to pay royalties
to the franchisor when it is not continuing to provide anything of
value.
- Failure to adopt and enforce franchise system requirements and
guidelines. A key principal of a franchise system is
consistency of operations. The failure to adopt policies and
procedures that result in that consistency, and the failure to
monitor compliance with those policies and procedures, result in
quality differences and the failure to maintain high
standards. This, in turn, damages the trademarks, each of the
franchised businesses and ultimately the franchise system.
- Failure to respect franchisees by valuing what they can
contribute to the franchise system. Although the franchisor
developed the concept, franchisees are on the front lines daily in
terms of how the franchised business operates and they may have
valuable contributions and innovations to the operation of the
franchise system.
3200 North Central Avenue
. Phoenix . Arizona