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Why Franchising Works for Some People, But Not All

Franchising is a powerful methodology used by businesses in more than 75 primary industries for the purpose of distributing products and/or services. There are close to 800,000 franchised businesses in America, but probably fewer than 500,000 franchisees because many own multiple units and multiple concepts.

But there’s one thing about franchising than many people overlook. It’s not for everyone; and it may not be for you.

No one can argue that franchising doesn’t work, and yet people do! Many failed franchisees rant and rave to anyone who will listen about the evils of franchising. It’s understandable.

They bought a franchise thinking they would become millionaires, or at least financially independent, and instead they lost their life savings and sometimes more. Now they want to convince the world that franchising is a sham. Mostly, they want to destroy the franchisor that destroyed them. Again, it’s understandable.

But it’s also a shame because their failure most likely could have been prevented. And, while they will hate me for saying so, they are primarily to blame for their failure.

What is franchising? A methodology. A franchisor is responsible for developing the methodology, and a franchisee is responsible for implementing the methodology. It doesn’t work any other way.

There are many ways that franchising won’t work. For example:

  • A franchisor sells a franchise to someone who refuses to implement the methodology.
  • A franchisor sells a franchise to someone who implements only part of the methodology.
  • A franchisor sells a franchise to someone who implements the methodology, but the methodology isn’t compatible with the franchisee’s marketplace.
  • A franchisor sells a franchise to someone who doesn’t have the capital to continue implementing the methodology.

In those scenarios, franchisees almost always fail.

Franchising works only for the people who implement the methodology the way the franchisor says it must be implemented. Try it any other way, and you’ll lose, as some people do.

But those failures could be prevented. Here’s how:

  • Before you buy a franchise, verify (call a dozen existing franchisees and ask them) that the franchisor has a working methodology that produces profits for franchisees.
  • Verify that the methodology works in any market, and specifically in your market.
  • Make certain that you are appropriately capitalized (again, ask franchisees for their recommendations).
  • Promise yourself that no matter what, you will follow the franchisor’s directives. You may think you have a better way of doing it. Do yourself a favor and listen to the franchisor.

Anything less, and you’ll probably fail.

There’s one other scenario which will sometimes produce failure: A franchisor that doesn’t have a methodology convinces you that it does, and so you buy a franchise and fail.

Shame on them, but shame on you, too. Every franchisor in the USA is required to provide a disclosure document. Use that document to verify what the franchisor tells you. In franchising, when you fail to verify, that won’t be your last failure.

Franchising is a powerful methodology that works for some 3,000 businesses in North America. But I recommend that you verify that statement, and every other statement about franchising, because while it’s a powerful methodology, it does not work for everyone. It may not work for you.

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Dr John P Hayes article contributor
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