Why Franchises Fail & What to Do About It Part 1

When a franchise location fails, everyone involved loses.   Can most franchise failures be prevented?

Whether you are a franchisor, franchisee, future franchisor or franchisee, or service provider to ‘zors and ‘zees, it’s safe to assume that you want to succeed.

In order to understand and implement the principles of success in franchising, it’s essential to recognize the attitudes and behaviors that so often lead to conflict and, ultimately, failure within franchise systems.

As a 20 year veteran and a daily student of franchising, I’ll share my beliefs and observations on the subjects of franchise successes and failures in this multi-part series – and welcome your thoughts, questions and comments at the end of each blog post.

The inspiration for this series of posts came to me in the form of a short Twitter message by a franchisee named Jenny:

“Never ever get involved in a franchise,” Jenny tweeted this morning, “I have signed a deal with the devil.”

What Satanic franchisor was tormenting this poor woman so? I wondered.

I clicked on Jenny’s message and was transported to her Twitter page. In just five short Twitter entries, Franchisee Jenny had created one of the most compelling, revealing and depressing franchise cautionary tales I have read.

Here is the content of her entire Twitter page with her picture; only her location, identity and franchise name have been obscured:

Name jenny —–

Location ——-

Web —–.com

Bio Run a print and design company in —–. Desperate need of interesting conversation

12:59 PM Mar 10th Sitting in my print shop waiting for a sudden onslaught of customers

12:13 PM Mar 18th looking out of the window watching the world go by

7:29 AM Mar 20th Wondering if there is likely to be any work t do today. Might actually have to attempt some marketing

1:09 PM Mar 23rd I have just spent ages picking my favourite top 5 albums on facebook. Now I have finished and everyone can see, I feel a bit pretentious

7:58 AM Nov 24th Never ever get involved in a franchise I have signed a deal with the devil

Jenny is the poster child for franchise failure.  Despite the fact that she owns a small business in one of the most fiercely competitive segments of the service industry (printing), she seems content to just wait for fate to decide whether her business will succeed or fail.

Instead of posting a photo that shows that she’s an energetic professional eager for your business, Jenny displays herself slumped lazily on her couch.

Instead of making sales calls, attending Chamber of Commerce networking events, or putting on seminars, Jenny prefers to wait in her shop “for a sudden onslaught of customers.”

Instead of dropping by new businesses in town or bringing donuts to customers she hasn’t seen in a while, Franchisee Jenny is “looking out of the window watching the world go by.”

Rather than sending out email blasts, postcard mailings or putting together a webinar, Franchisee Jenny is “spending “ages” picking her favorite albums on FaceBook.

Rather than using Twitter to find and follow hundreds of potential customers in her area, Franchisee Jenny follows 22 “people” that include Neil Diamond, The Ellen Show, John Mayer, Britney Spears, Martha Stewart, Demi Moore, 10 Downing Street & Barack Obama.  She’s built a following of 14 followers consisting of a few spammers plus Britney Spears & 10 Downing Street.

When Jenny’s printing business fails (as it surely will, barring divine inspiration and/or intervention), she will lay the blame entirely upon the terrible economy, her greedy landlord, unforgiving lenders and vendors… and especially on her evil franchisor.

In franchising, success is a team effort.  Unfortunately, so is failure.

You don’t need a crystal ball to see what is going to happen next.  In the printing industry (as in many others), aggressive marketing, efficient operations and diligent customer service are critical for success in the best of times.  In a down economy, they’re a matter of survival.  Printing franchisees who spend their days gazing out the window waiting for an onslaught of customers are not long for this world.

Jenny’s print shop franchise will likely fail.  She will likely lose her investment, her credit rating and perhaps her home.  The lenders will end up with a defaulted loan, the landlord with an empty space and no rent monthly check, and the vendors with more used, repossessed equipment in their warehouse.

The franchisor will lose the future royalties due from the now-bankrupt Jenny;  they’ll lose her store’s contributions to the advertising fund and the system’s buying power, and their reputation will be damaged in that market.  In time, they may resell the territory to a new franchisee, but every franchise failure is a black mark on their record, one that must be disclosed to future potential franchisees.

Fingerpointing, hard feelings and, possibly, litigation will follow.  Franchisee Jenny will blame the franchisor for making unrealistic promises, not providing enough support and, in short, not making her successful.  The franchisor will blame Jenny for not following the system, not promoting her franchise and, in short, not taking responsibility for her own success.

Both, probably, will be right.

Simply blaming Jenny for her lack of motivation, accountability and sales & marketing acumen is easy but short-sighted.  Many critical questions remain:

How did someone as ill-suited to be a printshop owner as Franchisee Jenny end up in this situation?

Could the franchisor have anticipated this result with a better franchisee screening and selection process?

Could the franchisor have reoriented Franchisee Jenny with a better marketing and sales training program and requirements?

How did Franchisee Jenny get the idea that fate – not her own hard work – would provide an onslaught of customers?

Could the franchisor have mandated sales and marketing programs that Franchisee Jenny would be required to follow?

What else could have been done to prevent this situation – or can now be done to keep it from becoming worse?

Also read: Why Franchises Fail & What to Do About It Part 2

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