Franchise Blog

A potential franchisee should always find out about the history of the franchisor in the territory that they are planning to open their store before entering into a franchising agreement with the company. If the franchisor has previously had a location in the territory that closed or failed for some reason, it will be important to take that into account. A failure by a previous franchisee does not mean that you will fail, but it should give you pause for a variety of reasons.

One thing to examine is whether or not the previous franchisee failed because of a local problem. Perhaps the area you are considering opening your franchise in is not as receptive to the products or services offered by the company as other areas due to regional or demographic differences. Or, perhaps, the local economy is more troubled than most, causing the franchisee to be unable to turn a profit. If you encounter either of these issues with the franchise location, you should seriously reconsider opening your franchise in that territory. You will also probably want to do more research on where and how the company’s stores are most successful before you enter into an agreement with them, as you now know that location can mean the difference between success and failure with their product or service.

Even if the failed franchise is entirely or mostly the fault of the previous franchisee, you still might run into problems ensuring the success of your endeavor. If the old franchisee has already closed their store, the image of the location going out of business has likely damaged the brand name locally, and customers will be discouraged. Furthermore, even if you are simply taking over the franchise from the current franchisee, you need to find out whether the franchisee failed because of poor customer service on the part of the management. Simply putting out a sign that says “under new management” will not be enough to win back all of those offended customers.

Once you have evaluated all of the potential problems that could result from purchasing a franchise in a territory where a previous franchisee has failed, if you still want to go ahead with the venture, you should consider asking the franchisor for special help to get your business off the ground, especially if the brand name may have been damaged locally. The franchisor may be willing to work with you to promote the new management and/or location with extra marketing dollars, which can be used for a variety of tactics to promote you and repair the name of the company. For instance, the franchisor could be willing to provide you with something like mailings and coupons to drive new customers to your store, and bring back the old ones. If done effectively, these marketing tactics can reintroduce the brand and repair the company’s standing locally, a big benefit for the franchisor. Of course, introducing you as new management and increasing your customer base should also boost your chances of success, even in a potentially undesirable location.

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