Can You Turn the Corner with a Struggling Franchise?

Is it possible to turn around a struggling franchise?

A franchise business is an attractive prospect for many entrepreneurs, offering the market power of a brand name with the chance to be in charge of their own location, but what happens if the franchise you want to invest in is failing?

If you can identify the problem areas and you have the business skills and capital to change them, you can resurrect a failing franchise into a profitable business. 

What are the warning signs of a struggling franchise and what can you do to turn things around?

Unkempt Location

If a franchise location is looking a bit the worse for wear, consider that a warning sign.

Perhaps employees are simply not keeping it as neat as they could; look for signs of less than thorough cleaning. Peeling paint, damaged equipment and a general air of disrepair are also signs to be wary of.

What you can do: If you decide to buy the franchise, set aside a budget for rejuvenation. If you want to attract new customers or entice old customers back, a fresh new look is in order. Repair any damage to the building or equipment, replace cracked counters or peeling paint, and clean from top to bottom.

Incomplete Financial Records

Incomplete financial records are a sure sign that something is amiss.

If you want to buy a business, naturally you need to see financial statements and a thorough breakdown of its finances. If a franchise is struggling, the current owner may be reluctant to let you have the full story.

What you can do: Insist on seeing full financial records. They'll help you understand why the franchise isn't thriving, and make an informed decision on whether you can turn that around.

Unhappy Workers

As the article "6 Warning Signs of a Struggling Franchise" points out, struggling franchises often have many unhappy workers. Employees at a struggling location are likely to be scared for their jobs and suffering from low morale.

Make sure to pay close attention to both the employees and atmosphere when you visit your proposed franchise location.

What you can do: Talk to employees, before and after taking over your franchise. Not only are they key to making it succeed, they're one of your best sources for insights into what went wrong.

Failing Relationship with the Franchisor

The franchisor is responsible for providing support, training and information to the franchisee.

Find out what you can about the current relationship; don't be afraid to ask questions.

Evidence of a lackluster or soured relationship with the franchisor is a sure sign that a franchise is struggling.

What you can do: Get as much information as you can. Talk to the current franchisee and the franchisor. If you take on the franchise, you'll be relying on the franchisor for support, so be sure the relationship is one you can mend.

Lack of Community Involvement

A strong bond with the local community is key to a franchise location's success. The local community is where the customers are, so making good connections with them is vital.

Take a look around, and talk to employees. How does the franchise connect with the community? What is currently being done to market it, and does it get involved in local events?

What you can do: Make community connections part of your plan for rejuvenation. Think about local marketing, and don't forget to build in community involvement such as event sponsorship.

Is it possible to turn a struggling franchise into a profitable business? Absolutely yes.

But first, be sure you have all the information.

By understanding why a franchise is struggling, you can decide whether you can do what it needs to make it shine again.