When Bad Things Happen to Good Franchises
When Bad Things Happen to Good Franchises
Even good franchises fail.
Even good franchises with quality products, supportive franchisors & diligent franchisees fail.
Not all, not most, but a good many fail.
That’s because opening a franchise, like opening a non-franchise, is a business venture. Franchise businesses are subject to the same threats of competition, market saturation and recession as other businesses.
A particular franchise may provide advantages that help (name recognition, established system, support), but it will also have burdens that can hurt or even sink a business venture (franchise fees, royalties, lack of flexibility).
In some cases, the fees and restrictions imposed by a franchisor could be the difference between profitability and failure.
The significance of this revelation for the franchise seeker, in my humble opinion, is two-fold.
First, if franchising is the right choice for you, you must find a franchise where the benefits (concept, support, etc.) far offset the burdens and costs (royalties, restrictions, etc.). Second, you need to consider the ramifications if you do everything right and still fail. Will you be financially devastated? Personally devastated? Will your marriage survive? Will family members who invested still speak to you? These are things you need to consider upfront. They are also things that many franchise sales professionals will try to keep you from considering. In subtle ways, they will tell you: Thinking negative thoughts is planning for failure. Think and talk about failure and you’ll drive away the Success Fairy. The Franchise Lie Many franchise marketers and sellers will try to convince you that franchises are the magical, risk-defying superheroes of business start-ups. They will cite imaginary statistics they claim are from the Department of Commerce or SBA that prove that independent businesses are doomed from Day One, while franchises hardly ever fail. (Read Lies, Damn Lies & Franchise Statistics for more on these claims and who uses them) The few franchises that do fail, they’ll tell you, were owned by bad franchisees who “didn’t follow the system.” They had negative attitudes. They backed over the Success Fairy with their SUVs. These skilled sales pros claim that franchises, all franchises, are immune to the business failure virus. They lie. Here’s the Truth: Even Good Franchises Can Fail. The truth is, there are good franchises, bad franchises, and grab-your-checkbook-and-run-like-hell franchises. And not even good franchises, run by good franchisees, are immune to the pressures of competition and the economy. I was reminded of this when I passed a closed WOW Cafe & Wingery franchise in York, PA last week. It was a nice looking restaurant on the extremely high-traffic Route 30, not far from the Harley Davidson Plant (a fine group of wing-eaters there, to be sure). I had been to a WOW Cafe before and it was decent. Wondering why the York location failed, I checked Yelp to see if the food or service was lacking. Every review had been positive. Back on 7/20/2007 Mark A. wrote:
What can I say, this place is a guy’s dream. Good food, good drinks, and get this…..TV at the table! Well, TV at four of the tables. Those poor souls unlucky enough to get their own can watch one of the other screens hanging in the corners of the ceiling. Seriously, WOW Wingery has plump, juicy wings with lots of great sauces including Jamaican, Buffalo, Sweet and Sour and many others. . I’ve also had the catfish and the red beans and rice, both excellent. The service is excellent and if you’re lucky you’ll get to sample some of the other items on the menu. Someone brought by samples of the baked beans while I was there and they were delicious. By the way, did I mention they have TV at the table?
Back on 3/8/2008 Phillip G. wrote:
Though this is part of a larger chain, it is a franchise and the owner has been present every time we’ve ordered. Great quality, fresh chicken. The tenders/tossers/wings are superb, actually everything i’ve ordered has been great. The only thing I will say is some of the young people who operate the phones/registers are high school students and may be a bit disinterested at times.
Then, on 3/13/2009 Juli R. wrote:
Tried to go to the WOW Cafe and Wingery today and found it closed. Like out-of-business-closed.
Nearby, Damon’s Grill & Lone Star Steakhouse Franchises are Also Shuttered Just around the corner from the closed York, PA WOW Cafe & Wingery franchise sits the closed Damon’s Grill franchise. I’ve been a customer of that Damon’s in the past and the food was always good and the service excellent. The franchise is owned by one of the top multi-unit franchise owners in the system. Her nearby Lancaster Damon’s has been the highest grossing restaurants in the system. And still the York location failed. Across the street from the closed WOW Cafe & Wingery franchise is a Lone Star Steakhouse franchise, closed since 2008. It looks like a tourist attraction in an old west ghost town. Within blocks of one another, Hooter’s, Applebees, Smokey Bones, Logan’s Roadhouse, T.G.I. Friday’s and a bunch of other casual dining franchises are still duking it out. A new 5 Guys Burgers & Fries added to the competition in a corridor already filled with McDonald’s, Wendy’s, Hardees, Taco Bell, KFC, Subway, Dunkin Donuts and the rest of the fast food gang. Last year York, PA just barely kept the Harley Davidson plant from moving out of state. When that inevitably happens, there will be even more pressure on the struggling franchises that geared up for an industrial market that’s been hanging on by a thread. Their closures will push The Franchise Lie of a 90% success rate even further into Fantasyland.
Sometimes Bad Things Happen to Good Franchisees.
On UnhappyFranchisee.com, we’ve written a lot about the downfalls of poor concepts, unresponsive franchise companies, and outright franchise scams.
We believe that it’s in everyone’s best interest for franchisees to embark on their business ventures with eyes wide open.
Part of that is realizing that, sometimes, bad things happen to good franchises and to good franchisees.
If you can’t handle the truth that you can do everything right and still fail, then business ownership, franchised or not, is something you should strongly reconsider.
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15 thoughts on “When Bad Things Happen to Good Franchises”
If you are thinking about being a franchise owner BEWARE of super slick sales tactics when you visit the home office. I own a Mr Handyman franchise and we have owners dropping like flies all over the US but you would never know it when you get the pitch as someone wanting to buy. They treat you like visiting royalty but they won’t give you any real dope on how many owners are ready to go bust.
I had been looking for a Franchise since moving to the US. I had been to several franchise shows but it seemed that every franchisor could not give me a definitive answer about potential earnings, client base, investment and ongoing support. I felt that they just wanted my money. I was even told by a Franchisor, “Franchising is a rocky road full of broken hearts.” Unbelievable from a person trying to sell me a business!
During a Franchise show in Denver, I came across a company called Simply Office Supplies and they were looking for distributors. I was not exited about office supplies, especially with Office Depot and Staples just to name a couple of competitors. However, I was intrigued because their distributors had no overheads, the prices were 25% lower and there was no ongoing royalties, just a profit share.
I researched the office supplies and janitorial business. It has a sales turnover of over $900BN per year in US. What a huge market! I only needed 1% or .5% share of the market in my territory to be extremely wealthy.
The best part about the whole business is their support. I had no idea about office supplies, no product knowledge whatsoever. However, the business model is that all calls go to their call center, which is staffed by experienced sales executives. They answer all my calls, process all my orders, do my invoicing, accounts payable and they even make appointments for me. This leaves me to focus on customer service, deliveries and local sales.
I joined Simply Office Supplies in July 2011. I am on target to hit sales of $400K + in my first year. My only overheads are my delivery van, fuel, telephone and miscellaneous expenses totaling under $1000 per month. I am going to easily pay back my investment within the first year of
The distributors experience no royalties, no other on going fees a 2/3rd to 1/3rd profit split in favor of the distributor, on sales. All my support, web marketing, email marketing, tax collection, sales appointments and admin are paid for out of the head offices 1/3rd.
I was previously a teacher; I am so glad that I made the decision to become a business owner, with the help and support from Simply Office Supplies. I urge anyone looking to start a Franchise to consider looking at becoming a Simply Office Supplies Distributor; it’s been a great option for me.
James Home Services is Australia’s worst franchise!
I am currently a franchise owner of Lady Bug Pest Control Specialists trying to get out of a bad franchise. There are some very questionable business practices. One is that the franchise was to provide insurance because I did not have the proper license. I contacted the insurance company for Lady Bug and found out that if I had a claim they would not have covered me. Research and get the proper kind of attorney. I got an attorney to review the contract and little did I know I should have had an attorney who knew pest control law. It was an illegal set up. Right now I am David and Lady Bug is Goliath.
Your comment has been upgraded to a full post here:
We also have concerns about Lady Bug Pest Control’s marketing message and Area Developer structure. The latter can lead to overly aggressive franchise sales and inadequate support.
Thanks, all, for your comments.
When are you going to cover all of the Tilted Kilt closures?
How many Tilted Kilt closures have their been.
I am surprised since Tilted Kilt was on Undercover Boss that they are having trouble keeping franchises open. Everyone knows if you’re on Undercover Boss you are successful.
Oh I forgot Tilted Kilt had to pay to be on reality TV, darn it.
I have been meaning to post on Tilted Kilt. Anyone with information, insights or opinions please contact me a UnhappyFranchisee[at]gmail.com.
I found it interesting that the Tilted Kilt franchisor is suing its area developer for allegedly making illegal earnings claims:
Does anyone else recall similar lawsuits (FR vs Area/Master Developers for violating disclosure laws?)
Almost every TK in the Atlanta area has closed.
I see why Tilted Kilt fails. I went to a Tilted Kilt last year in Atlanta and sat there for 30 minutes while the watresses chatted with their friends at the bar as they glanced over at me. So, I went to the bathroom and found urine puddles galore… I left, never to return.
Several TK have closed in the past 2 weeks. Tilted Kilt is a failed brand in it’s current state. Where is corporate oversight?
I have read about Austin Handyman Service for home and business repairs, improvements and maintenance. They are a full-service Austin HandyMan, Home Remodeling, Kitchen and Bath, Painting, Remodeling, New Home Construction Service, Landscaping, Fence and Deck Service company.
At least 5-6 more Tilted Kilt have closed this summer.
Tilted Kilt is now down to 55 locations from over 100. One Georgia location left & all are gone in Alabama
Tilted Kilt now down to only 7 locations.