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5 Reasons why so many businesses fail – and why owning a franchise can help you avoid them!

Understand what the main reasons why a business fail are, and why a franchise helps you avoid them.


According the SBA (US Small Business Administration) more than half of all new business will fail within their first four years of operation. In contrast, over 85% of all new franchises will survive for more than 6 years. While no new business venture comes with a guarantee for success these statistics do show that chances of success with a franchise startup are considerably greater than an independent startup.

Here are some of the typical reasons why business fail and how a solid franchise can help entrepreneurs avoid these costly mistakes.


1. Under Capitalization

A common fatal mistake for many failed businesses is having insufficient operating funds. Business owners underestimate how much money is needed and they are forced to close before they even have had a fair chance to succeed. They also may have an unrealistic expectation of incoming revenues from sales.
A franchisor has launched several new franchises, sometimes hundreds and will have a firm grasp on the initial investment and operating capital required to succeed with its model.


2. Poor Management

Many reports on business failures cite poor management as the number one reason for failure. New business owners frequently lack relevant business and management expertise in areas such as finance, purchasing, selling, production, and hiring and managing employees.

A strong franchise organization will place great emphasis on training its franchisees to be strong managers of their business including day to day operations, management of staff and finances.


3. Inexperience

Whether inexperience lies in dealing with the intricate functions of all business or in the business niche itself, a lack of experience is a top reason why many new businesses fail.

A franchise will provide initial training as well as ongoing training and support to help fill this potentially fatal void of specific business and industry experience.


4. Poor Location

If your business is a retail, food or other walk-in or drive-by type operation then the old saying “location, location, location” is very true. Choosing the wrong location for your business can be a fatal mistake regardless of all other positive factors.

A franchise will help its franchisees carefully research, choose and negotiate the right location for the business. In addition franchises are generally preferred by most premium location malls and shopping centers.


5. Poor Marketing and Advertising

Even to the experts advertising and marketing often comes with a bit of guesswork. For a small business, especially one in its start up phase wrong guesses in advertising and marketing can be costly and ultimately force a business into failure.

A strong franchise system will provide its franchisees with tried and true advertising and marketing strategies and collateral taking most of the guesswork out of this process. Franchisees will be provided with proven methods for getting the right message to its potential customers.







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About franchisewizards (29 Articles)
Franchise Wizards is a Franchise Consulting company that belongs to a group of executives with over 25 years of combined experience in the Franchising Industry. Our mission is to help you achieve your dream of business ownership through franchising! Our industry experts can help you in many ways: 1) Leverage our deep expertise in the Franchising industry to help you select the right franchise for your investment, based on your background, goals and budget. 2) Receive coaching during the entire franchise selection and investigation process. We will partner with you every step of the way, so you can make most of your time, and make the best decision. 3) Get preferred access to the Franchise Directors and Founders, as we are connected directly to them. 4) Get access to our network of professionals that will help you in your new venture, including Funding Partners specialized in small business funding, CPAs, Attorneys, Business Coaches, and more! Working with us has no cost to you! We work with nearly 500 franchises and are paid by the franchisors we work with, not you! We help them find qualified candidates that would be great fit for their franchise networks, at the same time we help you find the best franchise for your investment.

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