Top 3 Reasons Franchises Fail

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Entrepreneurs looking to take advantage of an existing customer base often buy franchises instead of starting their businesses from scratch. But what many new franchisees don’t know is that franchises, like independent startups, can still fail. What exactly causes this? Here are three top culprits.

Stiff Competition

Before making your final decision whether or not to buy a franchise, one of the things you need to look at is whether you’re going to have lots of direct competition. Investing in a bookkeeping franchise opportunity in a town that’s saturated by companies providing the same service, for instance, will make you struggle to gain your market share. It’s best to look for an area where you don’t have direct competitors.

Poor Location

Finding an excellent franchisor is only part of the battle. You need to set up the business in an ideal location to boost your chances of success. No franchise that relies on footfall can do well if it’s located in an obscure, hard-to-access location. Top franchisors go out of their ways to find strategic locations for their franchisees to set up their businesses.

Inadequate Funding

Some rookie franchisees make the mistake of thinking only about the money they’ll need for buying the franchise. They forget that they’ll need to have adequate capital to run the franchise too. Your franchisor will certainly support you when it comes to such aspects as marketing your products or service. However, you need to have money to buy supplies, pay your workers, and so on. Better overestimate than underestimate your financial requirements.

Buying a franchise from a top franchisor significantly improves your chances of success. However, you need to realise what pitfalls could make your investment fail and veer away from them.