Why Do Franchise Owners Fail?
Occasionally, people listen to the Franchising 101 Podcast or read our articles here on Franchising News and respond with questions. In this article, we will be addressing some excellent questions we have received about the negative side of franchising from our very own readers and listeners.
As big proponents of franchise ownership here at FranCoach, we tend to focus on the positives. But are there bad franchises out there? Why do people fail at franchise ownership? It can be important to talk about what causes some of the negative pieces of franchising in order to get a full picture of what franchise ownership really looks like.
With that in mind, we want to discuss both sides of the equation. Why would someone fail as a franchise owner? Is there such a thing as a bad franchise? And on the flip side, what does success look like?
Are There Bad Franchises?
Let’s kick things off by diving into the idea of a “bad franchise.” Do they really exist? Well, there are probably a few… but they are certainly not any of the ones we are partnered with.
So how can you tell a bad franchise from a good one? Usually, a bad franchise will not make you do anything during the search process to prove yourself. Maybe there are a couple of steps you have to take, but then they just hand you the Franchise Agreement. It might seem like all they are concerned about is whether or not you can pay the Franchise Fee.
If that is the case… RUN.
Maybe that brand could be a fit for someone, but a franchise that is failing to do due diligence on its owners should give you a great deal of pause. At FranCoach, we would consider not having that franchise in our inventory.
But remember, these problematic franchises are just one-off brands that no franchise consultant worth their weight would recommend to you. We have talked about how there is no definitive best franchise or best industry, and the flip side is also true. There is no worst franchise or worst industry.
Why Do People Fail As Franchise Owners?
Next up, why would someone fail? Let’s start at the beginning: When we get people connected to franchises through our Discovery Process, it is often a six-to-eight-week journey. There will be anywhere from 10 to 15 steps along the way.
There are many cases when people make it all the way to the end wondering when they are going to fail. Maybe they have started with three or four franchises and managed to whittle it all the way down to one. They begin to question themselves, asking what the catch is and if it is too good to be true.
But in reality, the one thing most people fail at is super simple: not following the plan. If you plan to become a franchise owner but do not want to follow the plan… do not become a franchise owner. It is that simple. Let the proven plan created by the franchise guide you toward success.
Number two, put forth the effort. If you are jumping into the business full-time, what does full-time effort look like? For most people, it is about 40 hours. Maybe you are an overachiever and you put in 45 hours. Working more is not a badge of honor.
Some people in the corporate world like to brag, saying they are working 80-hour or 90-hour weeks. In reality, they are not. They are either lying or they are really bad at their job, making them put in that much more effort. Or maybe they do not like anyone in their house and do not want to go home.
When we say “putting in the effort,” we mean a normal amount of hard work. If you are a semi-absentee owner, this may only be 12 to 15 hours a week. Ask yourself: Are you genuinely putting in that time?
From there, there are a few other criteria to consider. You have to want to and be comfortable employing FSO, our acronym for “figure stuff out.” You have to want to be the person who is in charge and who will be solving problems. All of these items go hand in hand with following the plan and putting forth the effort.
Finding the Right Fit
How can it possibly be that easy? Well, the trick is finding out which franchise plan and system is best for YOU to follow.
Imagine you are terrible at sales – you do not even like talking to people, let alone trying to sell them something. But then, imagine you end up in a franchise that requires you to do B2B sales and you have to hunt to find each and every one of your customers.
It might have sounded good when you were talking to the franchise. Maybe you talked to the owners and they were so happy and making a ton of money. You thought, ”Oh my gosh, sign me up.” But you forgot that part where YOU are no good at what that franchise is asking you to do. Even if you are following the plan and putting forth the effort, it is not going to go well.
Really, it all boils down to finding that fit. When you work with a franchise consultant – like our team at FranCoach – that is their role. Our job is to find the best match for you.
Statistics Do Not Tell the Whole Story
You might have seen a statistic about franchising: After five years, 90% of franchise businesses are still open and operating.
What does that mean? Did 10% fail?
Let’s talk about failure. What does it look like? Just because a business is no longer open within those first five years, does that mean it failed?
Sure, that could mean failure. But there are a handful of other things that could pop up. Maybe the business was going great for three years, and then someone came in requesting to buy it. That is a good thing.
There are other reasons, too. A few years back, we had a client who passed away. The family decided not to keep the business, so it closed. That is not a failure, it is just a sad part of life.
Or take this story from Tim Parmeter, founder and CEO of FranCoach:
“My wife and I owned two franchises a few years back. We ended up selling both of them within five years. One of them became a conflict of interest with her new job. The other one, we had no intention of selling… until someone came practically knocking on our door asking to buy it. The franchise we owned was not available in the area anymore, and that person wanted the opportunity to own it. It was an easy answer for us. We were immediately interested. If they were going to propose an incredible deal, we were not going to say no.”
The moral of the story? Just because some franchises do not make it that full five years does not mean they are failures.
What Does Failure Look Like?
We are not saying that franchises never fail. Of course, some do. When that is the case, what does that mean and what does that look like? How does it happen?
Recently, we heard a story about a franchise owner from one of our franchisor partners. This franchise owner was complaining constantly. Essentially, they were saying, “This sucks, I want out.” Everything was negative.
The immediate assumption is that it is the franchisor’s fault. But let’s take a closer look… This particular owner had six scheduled calls with the franchisor’s business coach for which they did not show. There were peer groups the franchisor set up for their owners to help them succeed. This person missed three out of four of those peer support meetings.
It makes you question how hard the owner was really trying. They did not hire for the positions they were supposed to. They were supposed to be spending X amount of money on marketing, and they spent only half of it.
So yes, that person may close their doors and we might consider their franchise to be a failure. But the diagnosis is pretty simple: They were not doing anything required.
It is like getting an F in school and complaining that the teacher sucks and that your bad grade is their fault. But if you have not been to class more than twice during the semester, you have not turned anything in, and you flunked your one test… whose fault is it really?
This concept is very similar to franchising. When you think about the failure or success rate of franchise ownership, it ultimately comes down to you. Are you putting forth the effort? Are you following the plan? And have you found the franchise that is the right fit?
At this point, you are probably wondering how people end up with a franchise that is the wrong fit. Well, that is not happening on our watch. At FranCoach, our expertise helps you find the right fit.
But sometimes, people go out on their own to find a franchisor. They do not know what is truly important to themselves or what to look for in a franchise. This makes it hard to be successful.
Then there are the people who find a fantastic fit but do not put forth the effort. They miss six straight calls with their coach or start the franchise but do not put in the work. It is impossible to help those people. At the end of the day, you MUST do these three things:
Follow the plan.
Put forth the effort.
Find the right fit.
What Does Success Look Like?
What does success look like to you? It could be different from how it looks for the next person, just like the right fit.
There can be a stigma when it comes to franchise models, as some people say it is just “buying a job.” Maybe that sounds negative to you, but to the next person, it might sound amazing. It might be exactly what they want. Why? It allows them to have control over their lives and be successful.
Stop worrying about what other people want and ask yourself what YOU want. If you do not want to buy a job, maybe you want to grow a big empire. You want multiple units and a huge legacy to pass down to your kids. We can help you find a franchise that wants empire builders and that is great with handling multiple units.
Not everyone will want this, but some people will. Some people may even want to grow their empire with multiple brands, which not every franchise is okay with. You can make franchise ownership into whatever you want it to be.
Ask Yourself the Right Questions
In every search, there is a point in time when everybody starts to hyperventilate. Everything is sounding really good, so what is the catch? What if I fail?
Ask the question. Ask yourself, ask the franchisors, and maybe even ask other franchise owners. Ask them why someone would fail.
They are all going to say the same thing. People fail because they do not follow the plan, they are not putting forth the effort, or they did not find the right match.
The “what if” question of failure in everyone’s mind is not only normal but also something people should have. The best way to put that fear to rest? Ask the right questions. Understand what would cause a franchise owner to fail and ensure there is alignment in what franchises you are looking at and what is really important to you.
Who Are We Anyway?
You are probably wondering where all of this sage advice is coming from. FranCoach is a national search firm dedicated to working with individuals who are interested in owning a franchise. We've partnered with over 600 of the top franchisors in the country, spanning nearly 70 industries.
Our number one goal with our clients is to help them find the absolute best franchise for them to own. Our goal with our Franchising 101 podcast series and this series of informational articles is to help educate people on all aspects of franchise ownership.
Reach out to us to learn more about potentially becoming a franchise owner. There’s never any fee for our service, so why not take the first step today toward your better tomorrow?