Does Owning A Franchise Guarantee Success?
With statistics like 80% of businesses failing in the first year (source: Bloomberg, as quoted in Forbes Magazine 2013), many people wanting to get into business turn to franchises, as they have a better rate of success than many start-ups.
A fact that is not as well known is that franchises fail too.
Now before I start, I want you to know I am not here to bash franchises.
I currently am a franchisee (My husband & I own a franchise) and have been in various franchises for the last 14 years. We also have a business that we started from scratch ourselves.
If you want to get into a business, a franchise can be a great choice and as 90% of my experience, knowledge & success has come from being in a franchise, I am definitely an advocate of franchises.
The reason I want to talk about this today is that franchisees (the person who owns a franchise location) are subject to failure, just the same as a start up entrepreneur, yet people seem surprised when I tell them that!
The common belief held by so many people that I talk to about franchises is;
- They do not fail
- The franchise head office guarantees the success of the business
- They are absolutely turnkey and make owning a business easy
- This could not be further from the reality of owning a franchise.
Franchises do fail. It is most times, an individual location, with its franchisee owner that fails, not the franchisor (the chain owner).
We sold a franchise we owned in March 2014, and 1 week before changeover, the store next door to ours (we were in a retail location at a mall) failed. This was part of a franchise chain, yet the franchisee ran out of money and walked away.
The store remained closed for 6 weeks. It took the franchisor that long to find a new franchisee to buy into that location and start operating again.
At the same time a franchise location within the chain we were part of, closed down, due to reduced sales because the mall was undergoing construction.
It meant for that franchisee, a loss of a business and money, as there was an outstanding business loan.
So, 2 instances of where a franchisee has failed within 2 different franchise chains, within 2 weeks of each other.
It happens more than people think and that is why people are surprised when they find out that franchises fail too.
If you want to buy into a franchise, please go in with these things in mind;
You can fail in this business model, the same as any other, if you don’t run your business correctly.
That means you need to;
- Focus on sales, profits & cash flow
- Focus on your customers & giving a great customer experience
- Focus on your product & it’s consistency
- Focus on your staff (if you have any) and train & lead them
The franchisor (the head office) will help with marketing, as this is how they control their brand & the message to the market. They may also provide a “business consultant” or a “franchise liaison” to help you with getting your figures in line, but not all do.
At the end of the day though, they view your business, as your business & they do not bail you out if you are a poor operator.
If you operate your business badly, they will be glad to get you out, as you will hurt their brand (and understand, this is the most important thing to them, as that is their value) and they will get another franchisee in. After all, business is business.
So, I believe in franchises, I own a franchise, but I want you to know they are not guaranteed business success stories.
If you would like to talk further about how to optimize your franchise location or your start up business, sign up for a Complimentary 30 minute Success Strategy Session here.
Let’s make sure your franchise is a HUGE success!
To your business success,