4 Reasons New Franchisees Fail (and How to Succeed)
To be a successful franchisee, avoid disconnects between your initial good intentions and business ownership reality.
Most prospective franchisees express deep commitment to making their business a success. This is especially true during their interviews with management. They say, "Of course I'm going to do whatever it takes! It's my business and my investment at risk!" Yet, lack of follow-through is a common reason for new business failures. This can be a bit of a head-scratcher in the context of franchising, since franchisees are buying into a system and model for doing business in the first place. Why buy-in and then not follow-through according to that model? Owner grit and determination are other important business success factors.
So, why do some franchise entrepreneurs lose their commitment mojo despite their good intentions at the beginning? There are four main reasons why new franchisees either don't end up following the system or don't push through challenges. Here they are below:
1. As entrepreneurs, they are independent to a fault and want to do things their own way
Some franchisees just can't follow the franchise system. These franchisees tend to ignore precedent and the processes and systems that come with the franchise they purchased. They constantly swim against the tide, spending their energy re-imagining existing franchise methods. Their constant pushback can be grating on the franchisor-franchisee relationship. Or their radio silence, because they are off doing their own thing can be even worse. These franchisees often don't leverage the value that comes from being part of an owner community. Their isolation robs them of best practices awareness as well as fellow owner support.
2. Their life circumstances don't allow high engagement in their franchise business
Many franchisees are distracted and under pressure from forces outside of their business. For example, franchisees can be distracted if they keep their corporate job and never really put 100% of their attention on the business. Family care responsibilities, an out-of-state move or other disruptors can make timing less than ideal. If it's just too much, it's better to wait until you can clear the field a bit, or select a part-time franchise model from the beginning.
This can also happen due to unforeseen personal circumstances such as illness, which is why it is so important to have a support and staffing plan that creates extra resilience. Having a plan in place to protect your business can also reduce stress and help you stay focused.
3. They are under-capitalized
Some franchisees cannot afford to invest according to the standards the business requires. In this situation, franchisees end up stalling out or failing, because they are capital-starved. Quite simply, they run out of money before the business has a chance to ramp up. Following through on the franchise model also includes investing at the level the franchise recommends. If the typical franchise model includes two managers, but you only employ one to try to "save" money, that will impact customer service and business results. If the franchise requires or recommends a certain level of local marketing spend or community outreach, and you don't execute, you're not following the model.
4. They lack true commitment to do whatever it takes
Business ownership can be hard. Really hard. There will be times when only an owner's energetic and deep commitment to success will see the business through. But not everyone who aspires to be a business owner is truly prepared to dig in and persevere when things get rough. This commitment, self-starting mindset and founder energy can make or break a business. Successful franchisees never quit.
This isn't academic. Many business owners were deeply engaged in their enterprises and doing all the right things in January 2020. Then the global pandemic hit. While that catastrophe was unusual in its scale and impact, smaller catastrophes or difficulties can happen to anyone at any time. An owner's grit and determination can mean the difference between success and failure.
Look back on your personal and career history. When things got difficult, did you dig in and find new wells of personal strength to draw upon to see things through? Did you pivot and get creative? Were you able to keep your team inspirited and motivated? Was your personal support system behind you? You can't just quit a business if you don't like what's happening, the way you can quit a job. Even selling a business takes time and may not immediately release you from all of your commitments, such as leases and loan guarantees. Some people thrive under pressure, and others are crushed.
With this in mind, probe your willingness and ability to do whatever it takes. If you are working with a franchise consultant or attorney, share your thoughts with them. They can help you make a good decision that truly fits your desires, abilities and personal circumstances. They can also help you ensure a match between your circumstances, available capital and support system as well as the needs of the franchise business you want to start. Remember that sometimes the answer is to back off a bit. Instead of buying five units, buy two. Instead of investing in a high-cost franchise, look for something more manageable. Instead of buying a business right now, save an additional 6-12 months of household expenses to build your success cushion.
Ask yourself: Am I willing to do whatever it takes to be successful? What are potential limits on my time, support system, capital or personal commitment? Is my support system (e.g., spouse or business partner) fully on board? Are they also committed to doing whatever it takes to support me in my business venture? Is the timing optimal right now, or am I biting off a bit too much today? Would adding a bit more to my financial cushion first ultimately make my business launch more successful down the road? Do I believe in the franchise model I'm buying into, and am I prepared to follow the model? Having the right mindset, commitment, preparation and support can make all the difference in the world to your success. Take the time up front to examine these issues, so you can move forward with confidence.
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