Why do some franchise relationships fail?
In an earlier article, I explained that franchising is a simple relationship: The franchisor creates a successful business and then trains franchisees to duplicate the business. Franchisees learn from franchisors and implement the franchisor’s system for developing a successful business.
Makes sense ... but then, why do some franchise relationships fail?
There are many reasons why franchise relationships fail, but most reasons fall into one of two categories: Either the franchisor didn’t live up to his obligations, or the franchisee didn’t live up to his obligations.
In spite of the simplicity of franchising, there are no guarantees of success. No one can look into a crystal ball and say, “That franchise relationship will succeed, but that franchise relationship will not.” Even when both parties live up to their obligations the relationship can fail. Neither franchisors nor franchisees can control all circumstances. Local municipalities, federal regulators, fickle consumers, product irregularities and corrupt suppliers can spoil the best of franchise relationships.
However, when a franchise relationship fails, the reason can almost always be traced back to a negligent franchisor or franchisee. And that’s because all franchisors and all franchisees are not created equally. Some are better than others. Some are worse than others. Some who begin the relationship with integrity, suddenly, or over time, lose their integrity. And sometimes no one knows why.
The good news is that in the United States alone there are tens of thousands of examples of successful franchise relationships, many of which have enjoyed success for a generation or more. Rather than focusing on failed franchise relationships, you might focus on successful franchise relationships. Hundreds of franchisors in the USA, and several thousand franchisees, have discovered the secrets to success in franchising – why not learn from them?
If you ask franchisors for their secrets to success, you’re likely to hear them say:
- We created a viable, successful, profitable business model.
- We developed a business product or service that appeals to consumers.
- We developed a marketing program that captures consumer interest.
- We created a system for operating our business in a satisfying and profitable way.
- We created a training program that successfully transfers our knowledge and know-how to independent operators, or franchisees.
- We learned how to select prospective franchisees who would value and succeed in our business.
- We learned how to motivate and satisfy our franchisees, our real customers.
- We live up to the promises that we make in our franchise disclosure document.
If you ask franchisees for their secrets to success, you’re likely to hear them say:
- We invested the time to learn about franchising to discover what it is and how it works.
- We invested the time to discover if franchising is a good fit for our personalities.
- We identified franchise businesses that we knew we’d value and enjoy operating.
- We investigated numerous franchisors to find the right one.
- We asked countless questions of franchisors, franchisees, and franchise advisors.
- We listened to the franchisor and followed the franchisor’s startup and operating guidelines.
- We live up to the promises that we made to the franchisor when we signed the franchise agreement.
No matter how you look at franchising, it remains a simple proposition. If you understand why franchising works, and you’re cut out to be a franchisee, it’s a matter of you finding the right franchise business, and the right franchisor. And that’s not difficult to do because good franchisors abound, and they are looking for you! Once you make the connection, it’s not difficult to develop a mutually satisfying relationship.
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