Why New Franchise Locations Fail - And Why Yours Doesn't Have To

As a new Canadian franchisee, you've got your sights set on success. Unfortunately, failure comes to franchisees just as much as success, and it's not always clear on the outside what makes the difference between the two. Before you invest in your franchise or go full throttle on your business plan, here are some common reasons behind the failure of new franchise locations so you are better informed of what potential pitfalls to prepare for in advance.

Lack of capital

As a new business owner, you need to prepare for your business to not generate enough - or possibly any - profit for at least the first few years. While it may start making money early on, there are never any guarantees, and most businesses operate for a few years before becoming established and turning a reliable profit. Before you open your doors, you should have reserves that are adequate enough to keep you and the business going even if it doesn't make any money for a few years.

Poor or inadequate management

When you are a franchise, you are the boss. You need to be prepared to fully own that role. The decisions you make will have a profound impact on your business, so you need to be fully educated about your business, your industry and anything else that will have an impact on how you operate. Poor management can kill a small business almost as fast as a lack of capital can, so be ready to step into the boss's shoes or to hire someone who can.

Not the right fit

You have to consider all the angles when you are searching for franchise, and that includes how well you personally fit with a brand, your likely daily role within your franchise, and the industry your franchise is in. If you don't like the idea of marketing face-to-face every day, you shouldn't join a franchise where that would be your main job, even if you love the product. Make sure you are the right fit for the franchise you are joining. If you feel like you have to "force" anything, it's better to move to the next prospect on your list.

There is always the risk of failure with a new business, but you can mitigate that risk by learning from the mistakes other franchisees have made. Go into your new venture with your eyes wide open so you are positioned to succeed right from the start.