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10 Common Reasons Why Franchises Fail

Even if a franchise is in business for more than 20 years, there comes a time when the franchise fails and has to close down. When running a franchise, you need to stay ahead of your time and make sure you do whatever is in your power to lead your franchise to success. In order to achieve success, you need to learn why some new franchises the UK end up in failure and try avoiding such scenarios.  

Here are 10 common causes of why franchises fail:

1. Inadequate Support and Training

Due to poor training or lack of support, start-up franchises are more likely to end up in failure as compared to mature brands. Most new franchisees are provided with training and support limited to operational issues. General business training to new franchises is not provided.

Franchisees can protect themselves from these issues by ensuring to understand well in advance, the nature, content, and assessment of support and training given by the franchisor. If you are not satisfied, or if the provided support and training seems adequate, you always have the option to look for other franchises UK altogether.

2. Poor Business Model

A business model is a framework of how the franchise will be operated. If the business model of the new franchises the UK is underdeveloped or unclear, it will be no surprise to see the franchise move towards failure. It may also be the situation that the business model drafted is not up to date with the times of today, which will result in the franchise going out of business.

3. The Issue of Insolvency

In case if the low-cost franchises are not able to make the profits needed to support themselves, it will only be a matter of time before the franchise will have to declare themselves as bankrupt.

If a franchise goes broke, it affects all the other franchises. When a franchise is unable to survive, the franchisees face issues in their operational functions such as IT, supply chain logistics, and marketing and eventually, the franchisee fails.  

4. Wrong Fit

From a consumer’s point of view, a potential franchisor might love a certain business and would wish to see themselves run such a business one day. As a fan of fast food or coffee, for example, the potential franchisor may wish to see themselves operating food franchises UK or coffee franchises.

Since they love that service or product so much, they may decide to own that business. However, there is a huge difference between having a love for that service or product or, and taking the challenge of operating a business of that service or product.

At times, franchisees are not just right for a business. It’s not that they aren’t enough passionate about the brand, product, or the industry. It could be that they are not dynamic enough to change and grow over time with the business, or it could be that they are incapable of retaining or managing the staff. There may be many other reasons that just show they are simply not the right fit for the franchise business.

5. Inadequate Planning

The popular saying “If you fail to plan, you are planning to fail” is quite true. Especially in the case of running a franchise. Despite that, a lot of franchisees still neglect to prepare a proper business plan before starting off their franchise.

In the preparation of the business plan, it is important that you involve the franchisor. A detailed and well-defined business plan is crucial for the success of home-based franchises. It is just like a road map for the franchisor. A path to show the way on how to attain profits by achieving certain milestones. With the help and involvement of the franchisor in the planning procedure, franchises can operate their business according to the business plan.

6. Insufficient Reinvestment And Working Capital  

Businesses do not fail because they do not generate profits, they fail due to poor cash flow management. This cause of failure is not just applicable for franchises UK but for all businesses in any industry. If a franchise does not have the required working capital or lacks investment, it will be no surprise if the franchise ends up in a failure. In the case where cash keeps coming in the franchise is not more than the amount going out, the franchise will result in a failure.

7. Unfeasible and Unrealistic Expectations

In order to test if the low-cost franchises have unrealistic expectations regarding what they expect for their franchise in the future, it is best to observe their business plan. Doing so, it will give an insight into the unrealistic expectations of the franchisee. However, if the business model is not analyzed, the franchise may be doomed for failure.

8. Poor Location Chosen

Before the franchisor makes the decision of setting part time franchises in a specific location, it is important to conduct thorough research to understand if there is a demand for that product or service. If there is no demand for that product or service, the franchise will only fail.

9. Failure To Change

In today’s fast-paced world, it is essential for franchises to stay and keep themselves updated to successfully meet their customers’ needs. What they now want, what they now prefer, the franchises have to evolve accordingly. You cannot just run your operations and systems the way you successfully used to do so a year ago.

You need to understand for the sake of your franchise that evolving is inevitable. Sure, you may face some issues at the start, but once you and your staff members get into the routine, following the new changes will come naturally. The franchise market is constantly changing. It is essential that van based franchises adopt change with the trends and market. Otherwise, they will become irrelevant and eventually lead to failure.  

10. Failing To Follow the Defined System

In spite of investing in new franchises the UK that already have a prescribed method of doing things, there are some franchisors who think that they will be able to do a better job of running the franchise by making their own system. Although the franchisors are able to come up with brilliant ideas to bring an improvement in the system, if the ideas are entirely in disagreement with the values and offer of the brand, then the franchise may put themselves at risk of failure.

Guest post courtesy of Graham Bainbridge. Find the work-life balance you always wanted. Get in touch with Franchise UK for more information on how to become a franchisee.

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This is a post from a CEO Blog Nation writer. CEO Blog Nation is a community of blogs for entrepreneurs and business owners. Started in much the same way as most small businesses, CEO Blog Nation captures the essence of entrepreneurship by allowing entrepreneurs and business owners to have a voice. CEO Blog Nation provides news, information, events and even startup business tips for entrepreneurs, startups and business owners to succeed.

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