Business Franchise Australia


5 Clear Signs that a Franchise Might Be Struggling

Joining a franchise can be a way to benefit from its brand recognition, expertise, and resources; but only if it’s a healthy one. A franchise might seem in great shape at first glance, but there could be trouble brewing under the surface. Thankfully, there are plenty of ways that you can find out if a franchise is competitive or on its way out. Let’s take a look at some of the clear signs that a franchise might be struggling.

They Keep Getting Bad Press

If a franchise keeps making the news for all the wrong reasons, this is a major red flag. Even if a franchise looks like a good deal, you don’t know what PR scandal might come next, and whether it will be able to recover. You should check a few finance/business blogs and news sites and run a search for the company first. If what you get back is mainly negative, you might want to think twice about joining.

Successive Lawsuits

Another thing you should look out for is if the franchisor has been hit with lawsuit after lawsuit. This is very bad news as you have no idea if they’ll be able to recover from them. So, stay away from franchises that find themselves too often on the defendant side of lawsuits.

If you notice that a franchisor initiates a lot of lawsuits, this should not be a cause for concern. It’s perfectly normal for a franchisor to want to protect their rights, and the fact that they’re ready to spend money to prosecute offenders is actually a sign of a franchise that cares and is most likely in good health.

Deteriorating Relationships with Franchisees

You should also pay special attention to what the franchisees have to say about the franchise. If you constantly hear them talking about how their relationship with the head office used to be great but they can’t get help anymore, it’s a sign of a franchise that’s on its way out.

Financial Instability

Some franchises rely on bringing new franchisees in to stay afloat. This is why you need to have the franchise disclosure documentation examined by a skilled financial representative. They’ll be able to get a clearer view of the company’s finances. If you determine that they only need you so they can stay in business, you’d be better off going for a competing franchise that is thriving and actively trying to grow.

Excessive Pressure

Another sign that a franchise might be struggling financially is if they seem desperate for you to sign an agreement. Good franchises are very selective with who they work with and will never try to rush you. So, if the franchisor keeps applying pressure and tries to sweeten the deal by making offers you know they can’t back, go elsewhere.

These are all signs that a franchise is struggling and possibly on its way out. Go with a franchise with a solid reputation with the public and its franchisees and take the time to review any documentation in detail before you sign anything.