The top reasons why a Franchisor of a restaurant brand fails in expanding / Sustaining their business could be summarized as follows:
1- Concept simply not scalable / not worth being a franchise business -Remember! If one location is doing great business, it doesn’t mean that this brand is now ready to be franchised out.
2– Business is too expensive to make any financial sense! Someone who has a new brand with a few locations that is asking for $50,000 per franchise and 8% royalties, and doesn’t justify such an ask with a proper, legitimate financial plan, will not attract any serious investors.
3–Owner’s Reputation! This should actually be the first point. Imagine franchising a brand from partners who have a reputation for continuous fighting and disagreement. What future can you expect from such owners?
4 – The business is not yet ready to be franchised! There is a significant underestimation by operators who are hands-on and heavily involved in the day-to-day running of their business. They often think that franchising their brand to new investors just requires responding to a few emails or calls. However, the moment you decide to franchise your business, you need to establish a proper structure. This involves going corporate and building your corporate team, setting standards, creating manuals, and engaging lawyers and trainers, among others.
5-Lack of vision & business culture! Imagine a business owner who simply franchises out his/her business to make more money, thinking material, and doesn’t care about what happens to his franchisees, no vision, no mission statement, and no culture at all. Will this business go anywhere?
6- Poor Business Decisions – I have encountered numerous franchisors who have made significant strategic mistakes. These include, but are not limited to: selecting and approving inappropriate franchisee locations; lacking solid criteria for franchisee selection; making inaccurate financial projections; choosing unsuitable suppliers; forming poor partnerships; implementing ineffective marketing strategies; and selecting the wrong corporate staff or legal advisors.
7-Franchisees may not be profitable if they are continually pressured by brand demands for more upgrades, smaller investments, and increasing site expenses that do not align with projected sales growth. This situation can lead to frustrated franchisees who may eventually band together against the franchisor. There have been numerous instances worldwide where groups of franchisees have sued their franchisor, accusing them of prioritizing their own profits over the franchisees’ success.
8- Lack of innovation / Technology , in The past this wouldn’t be a problem if the franchise had good food and good system ! but in our days , contineous innovation is a must if you don’t want to lose your business to competition ! invest in technology and work on reducing overhead expenses by implementing advanced systems .
9 – Disengagement from the network! What can you expect from a franchisor who doesn’t frequently connect with their franchisees? When there are no business updates shared, no regular calls, no annual gatherings, and no celebrations, franchisees begin to feel disconnected. If you don’t keep your franchisees engaged and informed about daily business decisions and future plans, they may feel that you are absent. This disconnect can lead them to run the business as they see fit, ultimately damaging your brand image!
10-Lack of auditing/inspections / training! If a franchisee doesn’t have regular visits from the franchisor’s team, they will tend to become creative in deviating from the core business model and start implementing their own ideas. If regional managers don’t often visit, report, and train, the franchise model will be at risk, and customers will end up realizing that there is no consistency between one franchisee and another! hence, the business loses image and reputation.
Cafe de Vie 