Why Some Franchises Fail: Avoiding the Pitfalls of Franchise Ownership
Franchising is on fire right now, with new locations opening every eight minutes of the business day in the U.S. The excitement around the industry is undeniable, and for good reason—it’s a proven pathway to entrepreneurship. But as exciting as it is, there’s also a tough conversation that many don’t want to have: why franchises fail.
Tyler and Ryan dive deep into the common mistakes potential franchisees make and, more importantly, how to avoid them. Let’s explore the top reasons franchises fail and how you can mitigate the risks to ensure success.
Reason #1: Buying the Wrong Franchise
The first and most common mistake? Buying the wrong franchise. As simple as it sounds, this is where most failures begin. According to Tyler and Ryan, many people get swept up in the excitement of a concept they love—whether it’s a fitness center they frequent, a restaurant they enjoy, or a service they admire—and make an emotional decision.
But here’s the reality: just because you love a franchise as a customer doesn’t mean it’s the right fit as an owner. You need to dig deeper, understand your “why” (why you’re buying a franchise), and define your “what” (what you want from the business). Is it financial freedom? More time with your family? A specific passion? Getting clear on these will help you choose a business model that aligns with your goals.
Reason #2: Failing to Explore Multiple Options
Another common trap? Falling in love with the first franchise you look at. As Ryan puts it, buying a franchise is a lot like buying a house. Imagine only looking at one house, without comparing it to others on the market. Chances are, you’ll start making compromises and trying to convince yourself it’s the right fit, even if it’s not.
The same applies to franchises. It’s critical to explore multiple franchise opportunities and compare them side by side. What works for one franchise might not work for another, and the costs can vary greatly—especially when you consider factors like debt, investment requirements, and growth potential.
Reason #3: Ignoring the Brutal Facts
Ryan and Tyler emphasize the importance of facing the brutal facts during the franchise buying process. You’re going to hear all sorts of promises from the franchisor, but you need to dig deeper. During your validation process—when you speak with current franchisees—ask the tough questions. If someone says it took them longer than expected to open or they didn’t hit their financial targets, you need to find out why.
In other words, don’t ignore red flags. If several franchisees are giving you similar feedback, it’s a brutal fact you need to address before making your decision. Keep asking "why" until you get to the root cause.
Reason #4: Trust, But Verify
In franchising, you’re going to be sold on the brand’s potential. But Ryan and Tyler remind us: trust, but verify. Just like you’d research a car before buying, you need to verify everything the franchisor tells you. Do they claim to have the best technology or marketing? Great—now go verify it. Speak to franchisees, do secret shopping, or even try the service yourself.
At the end of the day, doing your homework and confirming the details is how you mitigate risk. Whether it’s validating financial projections, understanding the competitive landscape, or ensuring there’s support for franchisees, you need to go the extra mile before signing on the dotted line.
Passion as an Accelerator: How Important Is It?
One curveball Tyler throws into the conversation is the role of passion in franchise success. Ryan’s response is spot-on: passion is an accelerator. While it’s essential to pick a franchise that can provide for you financially, if you’re passionate about the business, it can amplify your success.
That passion doesn’t necessarily need to be about the specific product or service you’re selling. Maybe you’re passionate about helping your community, providing jobs, or empowering your employees. Whatever it is, having a deeper motivation will help you push through challenges and create a thriving business.
Final Thoughts
At its core, franchising offers a fantastic opportunity to become an entrepreneur with a proven model, but there are risks involved. As Tyler and Ryan stress, the key to success is choosing the right franchise for your goals, avoiding the trap of falling in love with just one option, and always doing your due diligence by validating the details.
If you're thinking about taking the plunge into franchise ownership, consider reaching out to a franchise advisor. It could be the step that helps you avoid the common mistakes and set yourself up for long-term success. After all, the right franchise with the right preparation can truly change your life.
