You never hear about the huge number of franchise failures, businesses that closed their doors.
The franchise industry likes to keep this number a secret, but there are literally thousands
of failures every single year.
These are people who invested substantial financial resources into a franchise thinking
they were making a good business decision.
Of course everyone thinks they are making a good decision, who invests hundreds of thousands
of dollars expecting to lose.
But it's easy for first time buyers to get swept up in the excitement of business ownership,
especially when the franchises shows you only their good side.
Buyers embrace the vision of how great life would be running this business sun streaming
in through the windows as customers line up outside waving their money that they will
use to by their mansions and Mercedes Benz.
But when they actually open the business and they begin dealing with Employees, employee
attrition, employee theft, local economic challenges, food spoilage, tax considerations,
competition, business licensing and hundreds of other things that were not included in
the franchise sales pitch, then they understand.
And every business, every single franchise has operational requirements that you may
or may not enjoy performing or be good at.
And that is the number one reason for failure, but most people don't realize this, the person
bought a franchise that was not a good match for them.
And if you can understand this, not just with franchising but with any business you want
to start, you will have a huge advantage.
Everybody is different.
We have different tolerance for stress, we have varying levels of managerial capabilities,we
have different personalities, extroverted, introverted.
Good with numbers, not good with numbers.
First time buyers massively underestimate their required contributions to the business.
They think "How hard can it be I hire some people, they flip burgers, I get rich" and
it is that very naive one dimensional perception of business that is the primary cause for
failure.
We're best known on this channel for critical, reviews of franchises.
We point out some of the reasons you may not want to buy a franchise.
But while these videos might be entertaining, reviews are completely worthless taken out
of context.
Keep in mind, within every one of those franchise systems are also people who do extremely well,
and are extremely happy.
Chick-Fil-A for example, they have some of the most contented, happy owners you will
ever meet, but the franchise is not right for everybody.
For some people however it is the best franchise.
The same stands for any business.
This next statement is key, and if you can understand this about all business you will
be beyond 95% of the population.
If you put someone who is a bad fit in a great environment, they wont do well.
If you put someone who is a great match in a not so great franchise system or business,
they often do very well.
The key is to find a franchise or business that is the best match for your operational
capabilities, your personality, your goals, exit strategy, budget and other criteria,
of course as well as something that fits your local market demand and demographics, but
that's a whole other topic altogether.
I get asked continually, "Robert what is the most profitable franchise"".
I show them, then also have to explain why for most people this is not a good fit.
These types of franchises are very sales intensive, it is 100% on the owners shoulders to establish
business relationships, hire and manage sales teams, join the chamber of commerce, this
is not something most people are exceptional at doing.
But people look at that big number, millions per year, and think "heck Ill do anything
for millions of dollars per year" they invest, they hate it, every day is a struggle, they
under perform, then they call up Robert asking him to sell their franchise.
I love it, it's great for business, but terrible for you when you have to sell a business for
a loss.
We speak with hundreds of people every year.
And within the same franchise system you have people that tell us this franchise is the
greatest thing that ever happened to them and their family, they have 5 locations open,
the support is amazing and life is great.
Within the same franchise you have people suggesting this is the worst decision they ever made,
and leaving bad reviews online.
Now in these cases is it the franchise to blame?
They share some of the blame because they did not qualify this franchisee appropriately,
and some franchises are not overly selective, which can come back and bite them.
But when you see the franchise system is capable of success, and has proven that, but some
people don't do well, that is almost always the fault of the buyer not aligning the franchise
with their abilities, their business goals and possibly their location and demographic.
And the reverse is true when a buyer sees one negative feedback online, including our
reviews, they avoid what might have been the best fit for their own situation.
Another question we are often asked is Robert what is the best franchise?
What is "hot" right now.
Again this naive, one dimensional perception that somewhere, hidden from public eye is
this perfect franchise where everyone who invests is earning millions and not working
hard.
Does not exist.
And if you want proof, look on the Franchise City about us page, not one of us owns the
same business or the same franchise.
You have people in education, some in services, disaster recovery, food franchises, sports
and many others.
Now these are people who have access to every bit of franchising data and speak to thousands
of buyers, sellers and franchisers each year.
The most important aspect is aligning your own very unique goals, skills, operational
preferences, local demand and many other factors.
And buying a franchise just because of a name, or because someone else did well is a ticket
to disaster.
Same as making a decision on a small number of bad reviews.
Right here on the channel we recently posted the most profitable franchise video, Ill post
a link to it at the end, and the single most profitable franchise we have seen is in the
sign industry and is earning 10's of millions of dollars a year.
Yet in that same franchise system, are people who failed, and left negative reviews online.
Some people see the complaints, oh thats a terrible franchise, and they look elsewhere,
when they might have the same skills as the owner doing 30 million per year.
By the same token they might speak with owners who are doing incredibly well, and invest,
when they are nothing like that person.
They key is in understanding the differences between the people who failed and those who
succeeded.
Now is there a way to determine these things before you invest?
Yes there are.
One of the many free tools we provide to franchise buyers at franchise city is a psychometric
assessment.
This is a handy tool that can actually predict future performance in a given business environment
before investing money.
It also identifies things like compatability with a franchises growth stage, work styles,
business competencies, risk management and more.
This tool, in conjunction with your business goals sheet, demographic analysis and other
data helps us identify franchises that are best suited, and those that might be a terrible
choice.
This service is always free to qualified buyers
Every business, every single business has operational challenges.
It's never just sun shining through the windows while money stacks up in your account.
Buyers need to be diligent in identifying their own strengths, be honest about their
weaknesses and drill down deeply into the franchise operational model.
Most buyers just gloss over that when it is the single most important item to examine.
We hear buyers often complain they hate doing what they do, and wish they had known this
type of activity was involved.
If they had contacted Franchise City first these problems could have been identified
before they invested with tools we provide for free.
We just hit 50,000 subscribers today, big thanks to everyone who has supported the channel,
you know who you are.
I'll place the most profitable franchise link here, and more details on our free services
here, and if you have an interest in franchising and business Please like and subscribe and
hit the bell for updates.
thank you for watching.