Why Do Franchise Owners Go Out Of Business?

Why do some franchise owners go out of business? And why does it seem to happen ( a lot) within the first year or two?

Warning: The answers aren’t complicated. I promise you won’t need to pull up Excel and create a spreadsheet.

Top Reasons Franchise Business Owners Go Under

1. They run out of money.

2. They failed to do the proper research.

Starting with #1…

You may not know this, but one of the best things about buying a franchise is the fact that the franchisors tell you ( in writing) what your total upfront investment is going to be. There’s no guessing. Heck, there’s even a line in the documents you receive mentioning “ working capital.”

About Working Capital

In short, you need to have enough positive working capital to ensure that your franchise business is able to continue its operations and that it has sufficient funds to satisfy short-term debt and upcoming operational expenses. Except you’ll need more.

Case in point: the pandemic.