The Tips on How to Avoid Buying into a Franchise that Might Fail

Tips on How to Avoid Buying into a Franchise that Might FailThe best Canadian franchises are not always the franchise systems with the biggest brands are most locations, instead, they are franchised businesses that demonstrate a proven track record of success, in different markets, with people of different skill sets and backgrounds being able to successfully execute the business plan. Popular because they are basically businesses in a box that people can start and grow successfully. In fact, many people had their first taste of business success from successfully running a franchise. It appeals to lots of people because of its proven system and the ability to make profits for the buyer.

Now, if franchises were meant to help make running a business easier, how come many franchise owners are failing at their franchise business? How come they can’t make ends meet, not to talk of turning a profit? How come many of them are either trying to sell their franchises or closing their doors because business isn’t doing well?

The truth is there are many reasons why people fail at running their franchising business. From poor budgetary expenses to poor planning, you can outline hundreds of reasons. But instead of focusing on that, why not completely avoid failing? That’s better, isn’t it? So, here’s how to avoid buying into a franchise that could fail.

Choose the Right Franchise Business

Most experienced business leaders and managers understand that one of the worst mistakes you can make in hiring is to hire a person and then design a job around them; instead, first you want to design the roles, responsibilities and required skill sets in order to perform the function, and then you start seeking the right candidate for the job. Why do I bring up hiring principles when we’re talking about choosing the right franchise business?

One of the biggest mistakes people make when buying a franchise is that they assume just because it’s successful for other people, it will also be successful for them. In other words, they have not done enough research to understand what the core roles and responsibilities of the owner are in order to drive success in a business. It is only after the start running the business that they realize that they either don’t have the skills, interests or motivation to do what is necessary to achieve success.

In order to combat this massive mistake, the very first thing you want to do, before even starting to look at possible franchise options, is to figure out your core skills and abilities, your interests, your financial and lifestyle goals, and even your character and work style. For instance, if you’re an introvert and find chatting all day tedious and strenuous, buying a franchise where high customer interaction is a core requirement of the owner is probably not a good idea.  since most people have never bought a business before, figuring all of this out (I call this your ideal business model) can be a very daunting task so we recommend that you seek professional assistance from companies like FranNet.

Identify a handful of businesses

Once you have your ideal business model figured out, now you are ready to start going out and seeking businesses that leverage your core capabilities and interests, AND that appear likely to enable you to realize your financial and lifestyle goals. We recommend that you keep your search options to a manageable level – most of our clients are only looking at 2 to 4 businesses at the same time. Please note, we also recommend that you look at more than one business, otherwise you miss out on the education and understanding that comes from seeing how different franchise businesses drive success.

Find Out Everything You Can

Even the best franchises in Canada have flaws, thus we strongly recommend that you do thorough research you will want to find out everything you can about your intended franchisor and other franchising opportunities.

First, you will want to find out everything you can about the business from the franchisor’s perspective (this usually takes2 – 3 weeks). Once you’ve got this level of deep understanding, you are now ready to talk to the franchisees and see how well they’re doing, and to get their perspective on how well the business model as designed by the franchisor is working. We recommend that you talk to at least 8 to 12 existing franchisees, both in your market area as well as with franchise owners outside of your market.

Because this research is so important, the benefit of using a franchise matchmaking expert is that we provide our clients with questions to ask, tools to help compile/compare information, as well as conducting weekly coaching. This will help give you a more balanced perspective and help you make an informed and defensible decision.

Understand Competition

Lots of people misunderstand competition when it comes to franchising – they make the mistake of thinking that an industry sector is too crowded with competitors so they don’t even consider that market. Competition is healthy because it demonstrates a proven demand for a product or service. Savvy franchisors love industries where there is lots of fragmented competition (mom-and-pop shops, independent operators, limited large corporate players, etc.), because they know that with proven systems, processes and better marketing, they can come in and significantly outperform their non-franchised competitors.

Once you understand your skills and abilities, and you understand the franchisor’s business systems, processes and customer generation strategies, you will be able to accurately assess how well you will function in that franchisors competitive landscape.

Successfully running a franchised business is no small feat. Take your research seriously, before you make your purchase decision so that when you do buy, you will have high confidence that you are able to run a successful business that you enjoy going to every day, instead of have to join the league of failed franchise owners.

About Gary Prenevost

Gary Prenevost is one of North America’s leading franchise matchmaking experts. He has been a licensor, a master franchisor, a franchise consultant and a franchisee. As a Senior Advisor with iFranchise Group, Gary also works with companies to franchise their businesses; he also helps existing franchise systems improve their systems and processes. Prior to becoming an entrepreneur, Gary was a banker for over seven years, so with over 20 years of experience “on all sides of the franchise table”, Gary truly brings a 360° perspective to helping his clients find and buy the optimum franchise for them. Please visit for more information about Gary and his no-cost franchise matchmaking services.

Mar 30, 2014