Why Some Franchises Fail

How to avoid buying into a franchise company that might go under.


Why Some Franchises Fail

Just as there’s no absolute guarantee you’ll succeed as a franchisee, there’s no guarantee someone starting a franchise company will succeed. To avert failing as far as possible, you need to first identify the four stages of growth that most franchise companies go through.

The Idea.

Every business starts with someone having an idea of a better or more unique way to deliver some product or service to customers.

The Prototype.

Most franchise companies precede their franchising efforts with the establishment of one or more prototype units they set up to test, refine and prove the validity of their idea.

The Early Franchising Efforts.

After successfully completing the prototype stage, most franchisors face their biggest struggle of all as they establish their first 10 to 25 new franchisees as successful operators.

Critical Mass.

This stage consists of everything that comes after a franchisor has at least 25 or more successful franchise operations in place.

There’s no sense beating around the bush. As a good general rule, the earlier you get involved in any business going through these four phases, the greater the risk of failure. After completing the first three phases, most franchisors have gained enough mass and experience in their operations that they are far more likely to survive and succeed.

Most franchise companies become much more stable by the time they get into this fourth phase of their growth, but that’s no guarantee of success for you or for them. If they also have the right attitude and the right focus in their business, you’ll both have a much better chance of success.

It’s more work for you to go through all these steps to make sure these essential factors exist in a franchise opportunity. Your reward for doing this extra work? You’ll be as protected as possible from buying a franchise that might go under.

Jeff Elgin
About the Author
Jeff Elgin has developed a consulting system that matches pre-screened, high-quality prospective franchisees with the franchise opportunities that best fit their personal profile.

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