You bought a franchise, and your franchise failed. You weren’t able to generate the revenue you needed, and you were forced to shut down without experiencing the growth—and income—you anticipated. But does this mean franchise ownership isn’t for you? Or does it mean it’s time to try again?
These are complicated questions. Ultimately, whether you should consider buying another franchise depends on two primary factors: (i) whether you know why your franchise failed, and (ii) whether you have the financial stability to invest in another outlet.
Why Did Your Franchise Fail?
First and foremost, you need to conduct an honest assessment of why your franchise failed. As explained in a recent article on Franchise Direct, “If you can pinpoint the reasons your past franchise didn’t succeed, you’re in an excellent position to identify ways you can avoid making those same mistakes going forward.” Or, perhaps more ideally, if you can pinpoint issues with the franchise system or your location rather than your efficacy as a franchise owner, then you may be able to find success with a different franchise opportunity.
On the other hand, if you don’t know why your franchise failed, then buying another one probably isn’t the answer—at least not right now. Buying into a franchise system is not a guarantee of success, and if you make the same mistakes, you will likely realize the same outcome.
Keep in mind that in addition to answering this question for yourself, you also need to be prepared to answer it for prospective franchisors. If a franchisor sees that you owned a franchise for a relatively short period of time, this is going to raise red flags. But, if you can confidently explain that the system wasn’t working, that the branding didn’t resonate with your customer base, or that any of a variety of other issues that were beyond your control led to your franchise’s demise, then franchisors may be willing to give you a second chance.
Can You Afford to Invest In Another Franchise?
As a practical matter, it is important to consider your current financial condition as well. Buying a franchise isn’t cheap, and some financing options are riskier than others. Before you have another go, you need to make sure you are prepared to weather the financial storm that lies ahead. You will need to invest the capital necessary to build a successful business, and you may need to be prepared to go without a source of personal income for an extended period of time.
If you are comfortable with your answers to these questions, then by all means forge ahead. But, if you aren’t, it may be in your best interests to consider other options.
Discuss Your Franchise Opportunity with Attorney Jeffrey M. Goldstein
Are you thinking about buying a franchise? If so, attorney Jeffrey M. Goldstein can help you make an informed buying decision and negotiate franchise agreement provisions that protect your investment. For a free, no-obligation consultation, call 202-293-3947 or request an appointment online today.