{"id":4040,"date":"2019-03-06T12:14:07","date_gmt":"2019-03-06T12:14:07","guid":{"rendered":"https:\/\/allegrafranchise.com\/?p=4040"},"modified":"2025-03-12T18:23:00","modified_gmt":"2025-03-12T18:23:00","slug":"franchise-at-your-own-risk-three-warning-signs-a-network-is-in-danger-of-failing","status":"publish","type":"post","link":"https:\/\/www.allegramarketingprint.com\/franchise\/why-allegra\/industry-news\/franchise-at-your-own-risk-three-warning-signs-a-network-is-in-danger-of-failing\/","title":{"rendered":"Franchise at your own risk: Three warning signs a network is in danger of failing"},"content":{"rendered":"

Like any other business, franchise operations are not immune to the risks of bankruptcy. They, too, can suffer from over-expansion, undercapitalization or changing consumer tastes.<\/p>\n

Bally\u2019s Total Fitness, Blockbuster, Chevy\u2019s Fresh Mex, Quiznos, Perkins Restaurants and RadioShack are just a handful of the many franchisors that have flirted seriously with going under or failed outright \u2013 proving that no industry is safe and no brand name too large. In fairness, it should be noted that many of these companies have since restructured and are operating franchises today.<\/p>\n

Will other franchisors follow these companies into Chapter 11? Given that there are more than 3,000 franchise brands in operation in the U.S. according to Forbes<\/a> magazine, you can bet that more than a few are tottering financially if not on the brink of total failure.<\/p>\n

So, what\u2019s an entrepreneur to do if evaluating a franchise opportunity?<\/p>\n

In 8 Warning Signs You Shouldn\u2019t Buy a Franchise, AllBusiness.com reviews the red flags that potential purchasers should be on the lookout for. And, while all eight warning signs don\u2019t apply to franchisor viability, three do. Among keys to discerning a franchising network with potential viability problems, they suggest you:<\/p>\n

1. Lookout for a checkered past.<\/strong> The article notes, \u201cJust by doing some basic Google searches, you should be able to determine what kind of reputation a franchise company has. Is there a long history of legal problems? Are other franchisees complaining about the company? Has the franchisor recently experienced serious financial trouble or some sort of public relations nightmare?\u201d<\/p>\n

2. Beware of high franchisee turnover.<\/strong> AllBusiness says, \u201cItem 20 of the FDD (Franchise Disclosure Document) reports how many franchisees have left a franchise system within the last three years. A high turnover rate in relation to the total number of franchisees \u2014 especially if startup costs are relatively high \u2014 is a sign the opportunity may not be viable, or the systems being duplicated aren\u2019t working anymore.\u201d<\/p>\n

3. Take caution in over experimentation.<\/strong> The online source suggests that “If a franchisor prides itself on constantly changing methodology, or if current franchisees are having a difficult time keeping up with how many \u2018strategic pivots\u2019 the parent company makes each year, that key benefit (of a time-tested business model) is gone. Apparently, the \u2018proven, duplicatable system\u2019 doesn\u2019t work.\u201d<\/p>\n

The final recommendation to potential franchise buyers from AllBusiness? Perform your due diligence. \u201cIf you\u2019re investigating a franchise opportunity and don\u2019t encounter any of these warning signs, there\u2019s a good chance you\u2019re looking at a legitimate opportunity. Even then, however, it\u2019s best to have a team of experts (business broker, lawyer, CPA) assist you in reviewing documentation and comparing various franchise options before you settle on the right one for you.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Like any other business, franchise operations are not immune to the risks of bankruptcy. They, too, can suffer from over-expansion, undercapitalization or changing consumer tastes. Bally\u2019s Total Fitness, Blockbuster, Chevy\u2019s Fresh Mex, Quiznos, Perkins Restaurants and RadioShack are just a handful of the many franchisors that have flirted seriously with going under or failed outright…<\/p>\n","protected":false},"author":2,"featured_media":4045,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28],"tags":[],"class_list":["post-4040","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.allegramarketingprint.com\/franchise\/wp-json\/wp\/v2\/posts\/4040","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.allegramarketingprint.com\/franchise\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.allegramarketingprint.com\/franchise\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.allegramarketingprint.com\/franchise\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.allegramarketingprint.com\/franchise\/wp-json\/wp\/v2\/comments?post=4040"}],"version-history":[{"count":1,"href":"https:\/\/www.allegramarketingprint.com\/franchise\/wp-json\/wp\/v2\/posts\/4040\/revisions"}],"predecessor-version":[{"id":5344,"href":"https:\/\/www.allegramarketingprint.com\/franchise\/wp-json\/wp\/v2\/posts\/4040\/revisions\/5344"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.allegramarketingprint.com\/franchise\/wp-json\/wp\/v2\/media\/4045"}],"wp:attachment":[{"href":"https:\/\/www.allegramarketingprint.com\/franchise\/wp-json\/wp\/v2\/media?parent=4040"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.allegramarketingprint.com\/franchise\/wp-json\/wp\/v2\/categories?post=4040"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.allegramarketingprint.com\/franchise\/wp-json\/wp\/v2\/tags?post=4040"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}