The franchise is considered to be the safest mode of expanding a business. With a small number of failures in franchising compared to start-ups, it has become ready to go to the place of interest to invest. However, recent show a different fact. So why do franchises fail? What are the biggest franchise mistakes that have been repeatedly done by few franchises and what can we learn from them??
There is nothing as a sure bet in business. Sometimes traits are blessings but might be a curse too. Let us decode franchise mistakes in order to learn and save future businesses.
Why Do Franchises Fail:
Scattered Business Plan:
The business plan/model will be the main focus of most of the parties involved. This is the most common reason why franchise businesses fail. The best way to test whether or not a franchise has unrealistic expectations is to examine its business plan. With initial success, franchisors want to expand into other markets without structuring the complete franchise system. This leads to confusion in the operations aspect and with the roles and responsibilities. This is generally found in new businesses. The risk of joining such franchises is very high and is a sure-shot path to crashing the entire business.
To add on, competition should also be assessed with a broad view. It has become very easy to replicate a business. Without safeguarding the intellectual properties, the franchise is at a high risk of losing. SWOT analysis is a great tool to understand the market scenario and adjust the business model accordingly.
- Inadequate backend support:
The franchisor is responsible to give a strong support system to the franchisees. This can be in regards to marketing, IT, logistics etc. This occurs usually when the franchisor is not in a financially sound position. Without constant support, the franchise system creates loopholes which are cannot be monitored easily.
- Poor Training:
The training of franchisees is the most important factor when it comes to franchising. Training and support have to be taken seriously. Every successful franchise has ensured proper training modules among franchisees. The delivery has to be consistent across all franchises.
Reminder courses and new training programs not done at regular intervals makes the employees lose track of the procedure. The franchisees lose the focus towards the core business due to such intervals. This is the top reason why franchises fail. Once the systems are not followed, the franchise cannot perform at its optimal level.
- Use of technology:
There is no doubt that the internet has made the business world change into a complete dimension. If one does not move with technology, the expansion does not take place. It can be digital marketing, new equipment or the way of providing the service online. The generation is tech-savvy and wants the results as fast as possible. If the services are not upgraded with time, the business ends up losing out on customers and falls back in the line.
- Keep your customers first… ALWAYS!!:
Be a giver and not a taker. There is the mistaken concept of always being right. As a franchisor, individual growth can only happen when the customers are happy. That is why numbers talk for themselves. The real reason for the success is in fact the customers. Keep your customers happy and so will be the franchise.
- Get the numbers straight:
Many are delusional when it comes to facts. The imaginary number built in the head creates a false situation of bliss. That is why formal market research must be conducted to get the real facts. The decisions must be made based on the reports and numbers. Fictionalized figures cause the only demise to self and others surrounding.
- Recruitment:
There is a big difference between loving a franchise and running a franchise. Many are simply not meant to run a business. Managing human resources is a task and requires specific skills. The franchisee need not be from a particular professional background. The franchisee should or assign a manager who is capable of handling operations and make certain the systems are followed. Hence, get your recruit your franchisee done by an expert who will be a nice fit for your business. This, in most cases, does not happen and the franchise loses its control.
- Insufficient funds:
Insufficient funds are the most common cause of all business failure, not only in franchising. Without adequate working capital, paying bills becomes an issue. Even if the business is profitable, it can still fail if its customers have not paid it on time. Understanding the difference between cash flow and profit can mean the difference between surviving and failing. Reinvesting in the business can work wonders and could eventually result in insolvency if not done from time to time.
Knowing is only half the battle won, but the execution by action is the only way out. Now that you’re aware of why do franchises fail, take appropriate steps towards it. So, create a backup. Gain control. Optimize the training. Learn from other franchises and implement them into your business. Get your business models assessed by a franchise consultant. Giving a thought to the failures and implementing solid strategies will help your franchise achieve great success.
