Why Do Franchises Fail
Before you decide to either join and start a franchise, know the chance of failure is present. Just like any other business, if the right steps are not taken, the concept could fail. Testing and doing your due diligence during the early phases could protect you from the number of factors that lead to failure.
The Business Model
The concept of the business has to be approved by the consumers. If the idea is not received well by the consumers, the franchise will then fail. Also if your business model is complicated and not easily replicated, your company will struggle. The operations have to be taught at a standard for any businessperson that wishes to replicate it. Also if your business model is too similar to others already established, the business model is not successful, it is not likely to be a successful franchise.
Like many responses to real estate and business, the most important thing is location. You could have a great business model and a service or product that all consumers will want but they can’t find you. You are in an area where their not looking for your product or service. Since there is no opportunity in the location, the franchise will not flourish and the possibility of being successful deteriorates.
This goes hand and hand with the location, as you could have the best product or service but no one knows about it. If your franchise doesn’t have an established reputation, your consumers will not know to give your business a chance. You have to be knowledgeable about where to spend your advertising efforts. Advertise on a more localized level and niche to reach the right consumer that will bring your company profits. If you do not establish a marketing or advertising plan, your company may fail without anyone knowing it existed.
A major reason franchises fail is competition. With around 79,000 franchises in Australia, it is hard to find an idea that is popular but not tapped out. There are certain sectors of franchising that are rising due to the growth in healthier lifestyles. Following along in what is already successful could lead to your downfall.
You need to set realistic expectations for yourself and the business. It can take years to see profits and if you are not prepared your franchise could crumble around you. The hard work and effort put into being successful may be a deterring factor when deciding to start a franchise. If the expectations are unrealistic it can lead to failure.
**This article is for informational purposes only and is not intended to be legal advice. In relation to your individual situation, always seek advice specific to your circumstances from a lawyer.