I've often generalized the 2 major causes of business failure as: Lack of Knowledge, Lack of Capital. Richard Gibson, a Wall Street Journal staff reporter has expanded on the list as it applies specifically to franchising.
- Undercapitalization. As I always say "It will cost twice as much, and take twice as long, plan accordingly".The article accurately states:
- Insufficient funding is a prescription for business failure.
- Unrealistic optimism can be a recipe for disaster.
- Weathering unexpected situations without a financial cushion can be problematic even for an established franchise.
- Would-be franchisees should assume that they will lose money for the first couple of years, and prepare accordingly.
- Poor Management Skills. You must have it, obtain it, or hire it.
- Failure to Follow the System. Franchises aren't designed for the independent minded.
- Poor Fit between Zee & Zor. Like a marriage, you want to pick the right business partner.
- Inept Franchisor. The article states:
- Aggresive expansion can stretch a system and short-change franchisees.
- Avoid overzealous brokers and consultants selling concepts.
- Be careful of Inexperienced franchisors
Some good tips from the Wall Street Journal, and certainly 5 key areas which every prospective franchisee should closely evaluate as part of their due diligence in becoming a franchisee.
Believe & Succeed,DaleFranSynergy, Inc.Synergizing Franchising!