Starting a franchise can be an attractive business opportunity for many entrepreneurs. Franchising allows you to capitalize on an established brand and proven business model. However, while some franchises deliver ongoing success and profitability, others end up failing. Here’s an in-depth look at some of the key reasons why some franchises succeed while others struggle and fail.
Conducting Thorough Due Diligence
One major factor in franchise success or failure is how much due diligence the franchisee does before signing on. Savvy franchise buyers will thoroughly research the franchise company, interview existing franchisees, consult professionals, and carefully examine the FDD (Franchise Disclosure Document). Those who skip this important step risk making a costly mistake that can sink the business. Take the time to verify financial projections, understand any hidden costs, and evaluate the franchisor’s business practices.
Choosing the Right Franchise Sector
Not all franchise categories experience the same demand and growth over time. Food franchises tend to perform well year after year. Family entertainment centers are also popular; speak to the Do The Beach franchising team to learn more about this. Meanwhile, franchises tied to trendy products or services may initially flourish then struggle down the road. Analyze industry trends and forecasts to pick a franchise category with ongoing viability. Also, stick with sectors you’re genuinely passionate about and experienced with.
Site Selection and Location
A franchised business, like any retail operation, relies heavily on site selection and location. Franchisees who leverage market data insights to strategically choose their territory and site tend to outperform those who don’t. Be thorough when evaluating potential locations, analyzing factors like demographics, visibility, access, parking, competition and lease terms. Don’t settle on a questionable location just because it’s cheap.
Ongoing Franchisor Support
The level of corporate support franchisees receive can directly impact their success. Reputable franchisors have structured training programs for onboarding new franchisees, provide field support, have supplier relationships to leverage, and offer guidance with marketing and operations. Strong ongoing support enables franchisees to better navigate challenges as they arise. Lack of franchisor support can leave franchisees struggling.
Capitalization and Funding
Sufficient capitalization is essential, yet many franchisees fail to secure adequate funding upfront. They end up vulnerable to cash flow issues that can jeopardize the business. Understand in detail the total investment required, have a contingency fund, and explore all financing options. Adequate capital gives the franchise location the best chance to thrive, without cutting corners that could diminish brand standards.
Adhering to Brand Standards
Maintaining consistency across the brand is critical for customer satisfaction and protecting the brand reputation. Yet some franchisees fail to adhere to brand standards which can undermine outcomes. From the customer experience to store layout and design, products/services, and marketing – strict brand compliance is key. Franchise agreements allow termination if standards aren’t maintained.
Franchising offers a proven business model to follow but doesn’t guarantee success. Conducting due diligence, choosing a viable franchise category, securing a prime location, leveraging franchisor support, funding the business properly, and maintaining brand standards all heavily influence a location’s ability to prosper over the long-term.
