5 Reasons Emerging Franchises Fail & How to Avoid Them

1. Insufficient capital.

Before a franchisor begins to sign new franchisees, it’s extremely important that the brand’s capital is in a strong position. “Without the proper capital, it will be impossible to grow the brand and market it to the right markets, potential investors and franchisees,” said Sean Fitzgerald, No Limit Agency* Chief Development Officer. Furthermore, it’s very expensive to become a franchise and buy into those rights.

2. Inexperience.

Any emerging franchise brand needs a strong team made up of individuals who’ve had franchise experience. Having strong leadership who’s had experience with franchise development will set up your system for great success.

3. Not selecting the right franchisees for your system.  

Many emerging brands are reliant on accepting anyone as a franchisee because they need to bring in capital and open new locations. As a franchisor, it’s important to make sure you’re not choosing franchisees that don’t meet your values. “If you choose an individual who should not be in your system, there’s a very good chance they will under-produce at their location and be unhappy within the system,” says Fitzgerald. It’s important to choose franchisees that want to buy into your brand’s system and are going to be successful. In order to ensure you are choosing the right franchisee, it’s important that the individual has a strong understanding of marketing, sales and knows how to execute on a local level.   They also need to be well capitalized for the investment.

4. Brand viability.

It’s crucial that a brand is viable and will be easily replicable in all markets. If a brand doesn’t have a strong system in place, it will be hard to replicate the same concept in other markets, making it hard to achieve success across the board. Make sure the business opportunity is unique and has strong brand awareness, which will help with marketing and encourage loyalty.

5. Control.

It’s important to make sure each of your franchisees are buying into your system and business model. Early franchisees that commit will sometimes not follow the process, and the franchisor won’t hold them accountable.  The franchisor can become insecure and worried they may lose the business.  This lack of accountability and structure can lead to franchisees opening up locations in areas that aren’t a fit or following incorrect business practices. It’s important from the on-set that the franchisor and franchisee develop a relationship built on respect; one that follows the given business model. “Once you have one or two franchisees who aren’t following the business model, you can lose complete control and consistency which jeopardizes the brand’s entire franchise system,” concluded Fitzgerald.