Why Do Some Franchise Owners Fail?
Buying a franchise business is supposed to be the least risk way to start a business. But is owning a franchise guaranteed to make you money? Not necessarily… the truth is that some business franchises are extremely hard work especially in the fast food industry.
Most people know about the franchise industry due to the fast food franchises that specialise in providing the same quality of food all over the world. They guarantee the same eating experience irrespective of where in the world you buy a meal.
Think about it, in the food industry, you have to open your business in time for breakfast and stay open until late evening. Most fast food franchise owners can easily work a 12 hour day. They can also forget about weekends off as this is the busiest time for sales! This business would only suit somebody who is prepared to work hard for at least 60 to 70 hours a week!
The people who joined the fast food industry in the early days by buying a franchise opportunity have done remarkably well. Now, in many areas, this market is saturated with many different franchises trying to compete for your food money. They range from sandwich shops, coffee houses, burger joints, fried chicken outlets, donut establishments and pizza stores.
As the rates and rents for high street premises have risen in value, the cost of a meal in these fast food franchises have actually fallen when you take inflation into account. This has meant that overheads have risen whilst income streams have dipped. It is now harder then ever to make serious money with a fast food franchise opportunity.
To compete in this ever burgeoning market place, fast food franchisors are now demanding very expensive shop fittings so that the business can be highly visible and comfortable for the customers. They are also offering regular special offers which are often sold at near cost price, making their franchisees next to no money and generating a lot more work.
Another problem for franchise owners is the regular franchise fees that have to be paid to the franchisor. These combined with huge staffing costs and high rentals can all add up to reduce the profitability of the business model.
In recent times the market has become even more competitive with supermarkets now entering the fast food business. Many supermarkets are open 24 hours a day and you can pop in and buy decent food extremely cheaply. They have fast food counters where you can buy fried or roasted chicken, pizzas (made with your own choice of toppings), curries and salads without making a huge dent in your pocket.
Supermarkets also have another weapon in their armoury. With the advance in food preparation techniques and improvements in packaging, cheap ready made meals combined with the falling costs of microwaves mean that some families never need to go near a fast food franchise, even if they do not like to cook.
Even fuel stations have entered the fast food industry. Many outlets now sell meals that you can microwave in minutes after filling up fuel.
The final problem in the fast food industry has been the improvements in food quality and hygiene being demanded by the ever increasing health and food regulations which are designed to protect us from undercooked, stale or contaminated food. Anybody serving food now has to keep extensive records and maintain the food storage areas to precise temperatures. Fresh ingredients, if not used by a certain date have often got to be chucked away. This leads to wastage especially in foods like salad which do not have a high shelf life.
Taking all the above into account, the market is now extremely competitive and in some areas totally saturated. Be very careful if you are deciding to buy a fast food franchise opportunity and do your homework carefully. Make sure you take proper business advice from your accountant and franchise lawyer.
Naz Daud
http://www.articlesbase.com/business-articles/why-do-some-franchise-owners-fail-115481.html
Comments
I work at a small franchise salon. I have always wanted to open my own salon, the owner of the salon always?
told me that she was an open book and I could ask her what ever I wanted.
Recently I asked her about some advice and she completely discouraged me! I did not feel that she was sincere. She says that things are very expensive and most times small businesses fail.
Can anyone relate?
If you are a good stylist, your boss probably wants to keep you because she makes money off you. She wants you as an employee not as competition. If you want to open your own shop, do it. If you don’t, you’ll spend the rest of your life wishing you had and wondering if your life could have turned out differently.
References :
Start by writing a business plan to see if your ideas are viable. Go to http://www.sba.gov , http://www.score.org or http://www.bplan.com for instructions on how to write a business plan and sample business plans.
Then, Go to http://www.score.org/index.html and in the upper left hand corner, enter your zip code. On the next screen, you will get information on the nearest SCORE chapter. Call them and arrange for a free meeting with a SCORE counselor to review your business plan.
SCORE is a nonprofit association dedicated to entrepreneur education and the formation, growth and success of small business nationwide. SCORE is a resource partner with the U.S. Small Business Administration (SBA).
SCORE has 389 chapters in locations throughout the United States and its territories, with 10,500 volunteers nationwide. Both working and retired executives and business owners donate time and expertise as business counselors.
References :
Your boss is completely right. Have you gone out and priced all of the materials like chairs, sinks, etc. that a salon needs?
If there are 10 stylists in your shop, then the rent & expenses of the salon are being spread out over the earnings of all of them. If you try to go it alone, it’d be all of your earnings covering that.
Also, how many regulars do you have? Do you think they’ll all follow you? About a year and a half ago, my best friend left a shop where she’s been for years and had many regulars. She only moved a few miles away, but none of her old clients wanted to drive to her. That’s not to say she’s not a great stylist, but those clients would rather have convenience than quality. She’s been busting her @ss to rebuild her client base, and had to take out a part time job.
Also, in my experience, these chain salons tend to be in areas that encourage walk-in business. On the converse, a lot of independent salons might be on busy roads, but they don’t really get a lot of walk-ins (I am generalizing based on my market). So are you prepared for the loss of those clients?
How many salons are in your city? I just went to yellowpages.com, and there are about 50 within two miles of my house. I was looking for a new stylist about two years ago (that’s how I met my friend). I was overwhelmed by the number of choices, and had no way to figure out who was best. If I hadn’t met my friend at a party, I doubt I would have accidentally found her.
Customers don’t tend to rush towards any business that’s just starting out. It really does take time to prove yourself. You might be better off to find an established independent salon with an owner who wants to retire in the coming years who wants to sell the business.
References :
My mom has been an owner/operator since 1968; my best friend works in a four station salon
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