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2 ways a franchise company may fail entrepreneurs

On Behalf of | May 9, 2023 | Business Litigation

Entrepreneurs who want to run a successful company but perhaps do not have any hands-on business experience may choose to buy into a franchise as a means of running an enterprise while reducing some of the risks that come with the startup process. People think of franchise opportunities as low-risk, and that is often true.

However, the success of the franchisee buying into the company will depend, in no small part, on actions taken by the parent company. Sometimes, the failings of the broader business can influence how successful a franchisee can become during their first few years running their business. These are two of the ways in which franchises may fail franchisees.

1. They don’t localize advertisements

Buying into a franchise company means buying into an established brand with ongoing advertisement campaigns in many cases. However, companies decide what markets they want to target when buying advertising time and when customizing their marketing campaigns.

Sometimes, a company may choose not to run advertisements in certain markets despite having franchises in those areas. Other times, they may create marketing campaigns that are really only viable in specific areas and then do not localize them for other domestic markets. The failure to help a franchisee advertise in their local community could greatly diminish the value obtained when buying into a franchise.

2. They don’t provide proper training

Many larger companies have franchise area managers that provide professional support for new franchisees and help them train so that they are ready to open their businesses. Proper support at every stage in the process is crucial for an entrepreneur’s success.

Without education on how to make a recipe or how to train staff to meet company standards, a franchisee may have a hard time getting their company started and maintaining it according to the requirements in the franchise contract. Looking into how a company supports franchisees can be an important part of the decision-making process for would-be entrepreneurs.

Those who are struggling due to inadequate support may need to take action to get the help they need to protect their investment. Reviewing franchise contracts and company requirements in depth by seeking legal guidance can help entrepreneurs determine if a franchise is a good fit and if the parent company has fulfilled all of its obligations or if additional action may be necessary.