3 Reasons Why Franchises Fail

Gene Marks

Doug Heffernan is the King of Queens. Howard Stern is the King of All Media. Robb Stark is (or was) the King in the North. And Joel Libava? He’s the Franchise King.

Yes, the Franchise King. Joel has spent many years consulting and working with franchise owners to help them grow their businesses and be more profitable. He’s written books and spoken widely on the subject. He even has a new online course that teaches would-be entrepreneurs how to find the most suitable franchise and operate it profitably. Joel knows what it takes to succeed at franchises. And he knows what makes them fail. When I recently asked him about the causes of franchise failure, he gave me three reasons.

1. A Mismatched Choice

Many of today’s franchise owners purchased their franchises because they liked the concept, Libava said. Of course, there’s nothing wrong with “liking” a franchise concept or the product and/or service the franchise is offering. But to be successful, Libava believes, a franchise owner needs to go deeper than that. To illustrate, Libava told me about several people he knows who purchased business coaching franchises. One person in particular felt that owning a coaching franchise would be a perfect fit for him, he said.

“He brought a lot to the table,” said Libava. “He was entrepreneurial, smart,…and well-rounded. He even attended law school. And, he’s really personable. But, he was a mismatch for the franchise he ended up buying.”


Because he wasn’t a salesman.

According to Libava, the guy could sell. He just couldn’t sell fast enough to get a lot of high-paying coaching clients quickly.

“He wasn’t a hunter and he wasn’t a closer,” said Libava. “And because of that missing piece, he had to close his franchise business down.”

Libava strongly recommends that you make sure your skills and the franchise you want to buy are a match. If the skills you bring to the table are not a match, you’re bound to fail.

2. A Lack of Good Research

Contrary to what others say, Libava feels there’s no way to know how to research (let alone buy) a franchise without having done research before. Great franchise research involves a whole lot more than number-crunching, he says.

“To this day, I’m still floored by the number of people who contact me, who haven’t talked by phone and/or in person to franchisees engaged in the same business concept they’re considering. It is crucial to talk to the folks that have already invested their own money in the franchise you’re thinking of purchasing…and who are living the business every day.”

If you want to lower your risk and improve your odds of success, Libava recommends that you talk to 10-15 franchisees and visit one or two of them. They are the most important people to contact, and are the ones you’ll get your real answers from. A quick search on Linkedin or a call to  your local Chamber of Commerce will get you some leads. Also try Meetup groups.

3. Some People Are Not Critical Thinkers

Some people who buy franchises do so because they’ve been seduced into thinking that they’re buying a “turnkey” business or a “Business in a Box”, according to Libava. Sounds nice, right? Libava doesn’t buy it. The franchise marketing geniuses who came up with those terms deserve kudos for their amazing copywriting skills, he says. Unfortunately, most of them have never owned a franchise business.

“Franchise industry “speak” creates nice visuals,” said Libava. “Phrases like these almost make owning a franchise sound easy. Like someone from the franchise headquarters is going to be available at your beck and call.” That’s not the reality.

Although Libava feels the support from headquarters is one of the greatest advantages of franchising, he cautions that it’s not going to happen instantly. Franchisees need to figure some of the stuff out on their own. For example, if there’s an issue with technology at their location, they may have to contact a local technology services provider to get the issue taken care of instead of waiting for someone from franchise support.

Libava warns would-be franchisees not to be lulled into thinking that just because they’re buying a franchise, everything is going to be all set up and ready when they open – that any problem they experience at the local level will be taken care of instantly.

“You do whatever it takes as an owner,“ he said.

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