It is many an entrepreneur’s dream to set up and lead a franchising model towards success.
Why wouldn’t it be?
Great franchising models mean opportunities for your brand to expand at a faster rate in the local market, and sets up lower barriers of entry for exploring opportunities in international markets.
You’ll find many eager entrepreneurs clamouring for any chance at entering the franchising market under the illusion that it’s an easy, straightforward way to quickly scale their business.
Of course, the hard truth is, it’s just never as easy as it is made out to be.
For business owners who are more focused on short-term gains, the franchising model can very quickly spiral into a black hole (even though this model requires the owner to be foucsed on the long-term vision.)
In this post, I’ll dive into the 5 most common reasons that I see why most franchises fail.
Why Franchises Fail
1. Not Having A Solid Brand
Your brand is everything when it comes to setting your franchise off on the right foot.
Do you have a rock solid brand identity? Is it sharp, succinct, and commercially marketable? Discernible, scaleable and appealing to the masses?
You are, after all, looking to grow your brand into a household name that is top-of-mind when a consumer thinks of the key players in the industry or area you specialise in.
Put in the effort to make your brand memorable. Having an unremarkable brand is only going to make things that much harder to scale when you’re running alongside the big boys in the business.
2. Buying Into The Franchising Consultant Sales Pitch
Along the way, you’ll find many “franchising consultants” eager to cash in on your business. Upon hearing that you’re looking to expand, many of these consultants swoop in with proposals on how they can help conduct relevant market research, map out your financials and assist in quickly scaling your business into franchising success.
Franchising consultants are different from franchise law firms and should not be regarded as legal experts who are in a position to give you critical legal advice.
There are many franchising consultants out there who can offer great marketing, development and structural programs for your business but you will need a franchising lawyer when it comes down to navigating the legal side of things.
Some consultancies have an “in-house” team of attorneys – which can be tricky because, who are you to know if they upsell a pretty package of services to you, and simply hand off instructions to an affiliated law firm to “prepare the respective documents”?
What you’re working with would be a consultant looking to hook you into that $60-90k franchising consultancy fee, and setting you on your way with a generically prepared set of documents outlining how you could operate as a franchisor from here on.
It’s good to check into your prospective consultant a little further to ensure what you’re getting is someone genuine who is going to directly represent you and be accountable to you in the best way possible.
3. Poorly Defining Your Franchising Agreement
Think of every possible loophole, vague term, or way that your franchisee could go astray and affect your brand or revenue – and define a term in your franchising agreement to stop that from ever happening.
Sort your numbers out to create a financial proposal that is attractive to potential franchisees (think reasonable turnover period, manageable royalties, adequate franchisor support and so on), without chances of it circling back to bite you in the future.
Terms in your franchising agreement are to protect yourself and your brand as a franchisor, so take the time to perfect this before putting it in action.
Setting airtight terms means that you’re setting yourself up for less stress and more success down your road to franchising.
4. Failing To Have Strict Brand & Quality Control
If you’re turning healthy profits as a business and have everything sorted on the numbers side of things, keeping your brand in check and quality in food and service standards would be the next most crucial things on the list.
Regulars can quickly disappear if they notice that food portions are getting smaller, or that their favourite dish doesn’t quite taste like how it used to be anymore.
Customers are discerning and will pick up on the slightest changes, which is why it is imperative that you conduct regular, stringent checks on your service and food standards.
As your brand grows bigger, so do your marketing efforts. Sometimes, in a bid to reach a wider net of potential customers, brands deviate from their usual customer profile to tap into a new audience, often sponsoring or associating themselves with other brands or events that don’t quite match their brand identity. For instance, if your product has successfully tapped into a high-end market, you wouldn’t want to have a temporary booth in a heartland mall just because the pop-up rental rates were a good deal for you to make some extra sales.
Brand association and impact is lasting, being on-brand about everything is key.
5. Resisting Change
One of the biggest downfall of many businesses, big or small, is their resistance to change. Sometimes business owners get so entrenched in a successful product that they don’t want to risk tweaking the tried and tested formula that has yielded them success.
Industries are constantly evolving, and the food industry is an especially volatile one with trends that peak and simmer rapidly.
Failure to remain on-trend, or even to be aware of what your competitors are doing and whether your brand is relevant to its consumers anymore – is a dangerous tipping point towards a downward spiral.
The longevity of a brand relies heavily on its ability to evolve and shape itself according to the ebb and flow of meeting its consumers needs.
It isn’t to say that your brand needs to be on the latest Instagram fad to remain relevant.
Simply looking into your brand identity, storefront, product packaging or even the ingredients in your product and adjusting where it’s needed to constantly appeal to the current market’s wants and needs is enough of a baseline to work off on, and not be old news before it’s too late.