I was pitched that franchises has a better sustainability due to their inherited ability to succeed. I was also pitched that franchises can’t fail because when you buy a franchise, you buy a proven system.
Wrong – my two franchise units were going out of business for one reason or another.
I’m not going to point a finger to my franchisor because pointing fingers won’t solve anything. In fact, I believe in the saying that if you point one finger to other person, the other four fingers are pointing at yourself – meaning, I am the one who is responsible for my big failures in franchising.
All in all, my franchise units fail because of my wrong mindset and false hopes. Along with the globalized impact of recessions, my franchise units couldn’t withstand the challenges presented to them.
Well, things happen – as a business owner and entrepreneur, you need to pick up the pieces and move on – fast.
What are the signs of a failing franchise?
A simple question, but surprisingly, many franchisees don’t realize (or don’t want to know) that their franchise units are on the brink of failure.
One good sign that your franchise unit is about to fail is a stable sales figures and overall franchise unit performance. Unlike what many people think, stability in business is your enemy. You don’t want to earn a steady profit – you want to increase your profit.
When your franchise unit’s revenue peaks and becoming stable in at least 3 months, you need to start to worry and start to analyze possible problems: Is your local economy declining? Is your local market is being bombarded by new competitors? Is your franchise brand name not powerful enough to conquer the market? Is your franchisor leaving you (and other franchisees) stranded?
There are so many questions to answer – and if you do feel that your franchise unit is failing, your next step would be calling for help from your franchisor – this leads you to the second sign.
Normally, your franchisor will help you with your franchise unit problems. But what if your franchisor also can’t turn around the negative trends of your franchise unit? If so, then this will be your second sign of a franchise that is about to fail.
For me, I stopped at the second sign. I have analyzed my franchise units’ situation, and have tried many things to increase the performance of my franchise units, only to find that my stores’ revenues stay stagnant.
I then consulted my problems with my franchisor, and I managed to convince them to help me manage my franchise unit. The result: Revenue stay the same 12 months after it’s being managed by my franchisor. Not good.
To cut long story short – the drowning economy pull my franchise units with it. With no growth in more than a year period, my franchise units are starting to crumble. The end result: I closed down one franchise unit, and have the other one being taken over by my franchisor with poor financial rapport.
What to do if your franchise is failing?
You could try to do what I did – ask for your franchisor’s help to manage your franchise unit. Chances are, getting your franchise unit’s business operations back on track according to your franchisor’s operational standards can help you avoid business failures. One possible drawback in this is that your franchisor will ignore you, anyway.
Another suggestion – you could ask for help from franchise experts / mentors, fellow franchisees and other franchising forums, organizations and clubs to share info and seek help.
Know when it’s the time to stop
Many business owners I know – including franchise owners – say that they will try “until the end” to save their failing business.
After some real case studies from my friends and colleagues, I conclude that the best way for you if your franchise is free falling regardless of the help you receive is to close down or sell the business.
The keyword here is fail fast. You don’t want to hang on an ailing business, draining resources – often your personal money – only to find that you need to close down the business, anyway.
I choose to fail fast. Doing so, I save thousands of dollars that I can use to establish a new business (which I did.) A fellow franchisee I know hang on to her franchise unit through all the trials and tribulations, only to find her franchise unit closed down eventually – after spending thousands of dollars in her efforts to save the business.
It’s darn hard to close down your franchise unit, especially emotionally. But when the time comes, you need to act fast, pick up the pieces, and move on – that’s what entrepreneurs are good in!
Ivan Widjaya
On failing franchise
Image by Avolore
