Why Do Some Franchise Businesses Struggle And Fail?
Most Franchise Businesses are successful but invariably like any other business some do fail. Why do they fail? Most franchisors fail primarily because they took the route of franchising their business without proper planning and preparation.
Although franchising is a great way to grab market share quickly and without utilising your own funds, it requires a great deal of work to make it successful. The first and most important requirement for any potential franchisor is can the business model be taught successfully?
Many franchisees will come from a background of zero business experience. They will not only have to be taught about the franchisors products & marketing but will during the course of their training have to learn basic business skills like general day to day book keeping and proper filing techniques!
In many cases a potential franchisee without any prior business experience can become on of the top performers if s/he is trained properly and given long term support. The reason for this is because the franchisor is starting with a clean slate and the new recruit is more likely to listen, learn and utilise the systems given.
People who already have business experience usually like to try and run the franchise business in their own way. It takes a lot of effort to make them utilise all the systems and methodology of the franchisor. Bear in mind that these systems have take years of experience to create.
Another reason why some new franchises fail is that not every business model can be easily duplicated to work in another location. Some businesses might have been extremely successful in an area primarily because of the peculiarities of the people who live there.
Some franchisors fail primarily because they entered the franchise market under capitalised. Without proper access to funding and long term backing a franchise model is not going to achieve proper market penetration. A few businesses enter the franchise market place not understanding the level of capital that is required to exploit their franchises.
Capital is extremely important when it comes to marketing the franchise. Franchise exhibitions are not cheap and neither is advertising in franchise publications and on the internet. Franchise experts also command a high hourly rate when it comes to advising potential franchisors.
Once a franchisor has secured the funding required and then created a model which is easily taught and can work in most territories they have to create proper documentation, operating systems, operator’s manuals and a franchise agreement. These are just as important if not more important than the business model it self.
How can a franchisor expect their franchisees to pick the core skills required if they have not gone to great lengths to document it in an easily understood manner? Most franchisees use these daily and are almost like a bible for the successful operation of the business.
After all is said and done no franchisor is going to be successful if they lack basic communication skills. They need to be able to communicate with all their franchisees and maintain a harmonious relationship. People skills are extremely important in the franchise industry.
Franchising can be a very quick way of reaching out to new markets and exploiting the potential of your business if properly handled.