Franchise Business Pitfalls

Not one business person can confidently stand up and state that they intended to allow their business to fail. Every business person does everything in their power in order to avoid failure. The same is true when it comes to franchise businesses. This article will discuss factors that contribute to the failure of a franchise.
A growing statistic statement is constantly used but hundreds of websites. This statement is: “According to statistics from the U.S. Department of Commerce, less than 5% of franchise outlets fail annually”. To any person interested in franchising, this makes them believe that there is a 95% chance of succeeding; speak to a franchise lawyer before signing a franchise agreement. However, the reality is that this statistics statement was only valid in the 1980s when the United States Department of Commerce conducted a survey involving about 2,000 franchisees. In fact, a letter [IFA Asks Members Not to Say 90% of Franchises Succeed | Blue MauMau] from the International Franchising Association was issued in 2005 stating that such studies stopped in 1987. Therefore, several factors can fail your franchise.

Some of the pitfalls that can befall your franchise include the following:

· Location, location, location – one of the keys to any franchise or business success is location. The location of your franchise should have the following two characteristics: 

– sufficient demand for the product or services provided by the business 

– low competition from similar businesses

If a franchise does not have these two characteristics, it is likely to struggle to make adequate sales to cover the accrued overheads. Another key aspect of location is if the territory is too small; this can prevent the business from attracting a good number of customers. Therefore, it is important to carry out detailed research on the potential locations you intend to set up your franchise. Such locations must support your business into the foreseeable future for you to justify setting up there. Your research may include looking at how similar businesses fared in that location, how long they have operated for or if they have closed up, how long it took for the business to close up, and the reasons behind the closure.

· No access to adequate training and support – in order for your business to be profitable within a reasonable time frame, it is important to have adequate and correct knowledge and experience. Most franchises provide training schemes and ongoing support for new franchisees. However, if you do not benefit from such training and support, you will likely struggle to build your unit. Therefore, training is an essential element of any franchising business. Failure to receive adequate training results in failure to carry the brand forward and depleted skills for your staff that will not allow the best possible service to customers to occur. A lack of knowledge negatively impacts your customers, business reputation, and the ability to be profitable in the long term.

· Marketing – franchisees must promote their businesses in their territories to succeed. Extensively use online platforms to improve your rankings on search engines.