Why Franchises Fail (Advice from a LEGEND in Franchising)

Why do franchises fail? Is it the franchisor or franchisee’s fault? Gary Findley, CEO of Stellar Brands, joins me to discuss the answers to these questions and more.

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Why do franchises fail? That is a great—and popular—question. Is it the franchisor or franchisee’s fault? I’ve asked franchising legend Gary Findley of Stellar Brands to join the conversation. He has been on all sides of franchising for over 30 years and owns multiple brands.

Every franchise has a niche at a certain time. Curves, a brand Gary helped scale to 8,000 locations in eight years, is one example. Nobody was doing women’s only fitness, and nobody was doing it in small-town America. When he left, he moved on to companies like Facelogic and Snap Fitness. Then, he met the owner of Restoration 1 in South Florida. In 2016, he took over to help build the company. From Restoration 1, he purchased a company called Blue Frog Plumbing and Drain, The Driveway Company, and now a company called Soft Rock—with about 350 locations between them.

How does a “fitness person” or a guy that runs a beauty brand be successful no matter what franchise he touches? He follows the proven system. But to our original question, is the franchisor or franchisee responsible for the success and failure of the business? Sometimes, it can be either/or, and sometimes, it can be both.

“As a franchisor most of my life, it is understanding the value of making sure that you train people correctly and then that you support them. And I’ve been fortunate to be in systems that have really great retention and not many people getting out of it. And I just think that that is all about making sure we staff it with people who have the same—we’re aligned as a company. We’re aligned with the franchisee…making sure that you’re understanding that they’re business partners on the franchisee side… Lastly, I would say, setting those expectations up front. So when they’re in training, they need to understand what they need to expect from you as a franchisor, and you let them know that, here’s what I expect from you as a franchisee. As long as we’re working together, we’re going to give you a hundred percent.”

It’s about leadership and finding the right people with industry knowledge, and then the franchisor drives that business forward. So, Gary can go from fitness to beauty to plumbing. It’s all the same. That’s what I tell my candidates, too. Focus less on what the business does and more on finding people like Gary Findley, with a successful franchising track record that you can latch on to as a candidate, as a first-time business owner, and then follow what he does.

Why do franchisors fail? It can be a lack of capital on their side or the lack of a really good team on board. But typically, it’s growing too fast. They grow faster than they have the team to go out and build it.

People often say, “Well, if the brand isn’t here anymore, how is that a success?” I tell them, “Look, so that doesn’t mean that for the years that Curves was out there, a lot of people didn’t make a lot of money.” Just like Blockbuster, right? Blockbuster is obsolete today, but that didn’t make it an amazing investment back in the day. This really speaks to the idea that I am always trying to help people get to: businesses are built to be sold. You won’t necessarily retire from this and carry on for the next 15–20 years. That thinking is as outdated. You can’t count on a business being relevant in 20 years, but that doesn’t always make it a bad investment.

Every business has a season, a cycle, and it’s all about understanding where in the cycle you want to insert yourself. Do you want to be on the trailblazing side, which comes with more potential risk? Maybe not if you’re following someone like Gary Findley, who has a strong track record of success behind him. Other people like the idea of being in that second generation of owners, where you’re paying a multiple for what somebody else has built and then taking it from there.

If I were going to buy a business today, what would it be? Low investment, low overhead, high margins, no brick and mortar, and as recession-resistant as possible.

If you would like to learn more about finding a successful franchisor to back your dreams or you’re interested in any of the Stellar Brands, I want to be your Daly Coach. Leave a comment or contact me at http://thedalycoach.com/contact. Please like, subscribe, and ring that notification bell.

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