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One of the main reasons of Franchise business failure !

There are definitely many reasons that contribute to the failure of a franchised business , let's address for now one of the main reasons that leads to failure of franchised restaurant business namely .

Before that , we have two parts in the franchising process , the Franchisor ( brand owner) and the franchisee .

Franchisor might be a sole owner or a large company that is granting out franchise rights for one or more of their brands .

Franchisee can be a business man , investor or also a company that is looking out to franchise one or more brands to add to their portfolio .

Franchise business of different industries might differ in terms of criteria's of selecting a franchisee but let's agree at least , that in the restaurant and hospitality business in general there are main elements of success that starts with Passion , dedication , service orientation , customer friendly service , care , smile just to name few criteria's that sets apart the hospitality business overall from any other business !

So, when failure can happen ? here is the question and below is the answer.

When a franchisor decides that his/her business is ready to be franchised out they start looking for investors / Franchisee , which is their right to do (Yet experts advise that a module should be franchised out when having multi successful operating units that has successful records for two to three years consistently in order to ensure that this business will sustain once franchised - yet we see many franchisors having one location and they start looking for someone to franchise out their business module/brand , which i am not addressing in this article but i am going to address the main point of my article which is "Franchisee selection criteria" .

A franchisor should consider at least the following criteria's when selecting a successful franchisee for their brand ( Motivation , know-how , work ethics , management skills , organization structure , Risk levels of an investor and last but not least financial considerations .

The problem starts when a franchisor puts on purely the "Commercial" hat and from all above criteria's do consider only the last one which is "Financial part " , in other words a franchisor is now selling their brand name to someone who is offering money but not necessarily having ethics, knowledge of the restaurant business , solid systems , a structure that can respond and communicate with the franchisor demands in the future once buying the franchise !

So in brief after opening the first shop and mostly after signing a franchise agreement that indicates opening at least 5 shops in the next 5 years we see that the relation starts to deteriorate and blames between both sides going on fire (also i am not going to address here the different responsibilities and what are types of blames between both parties that normally happen in the world of franchise ) , and this leads to termination of franchise agreement from second year of operation if not third maximum which could all be avoided if the franchisor was more strict in following the set criteria's for selecting the right franchisee from the first place !


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