Franchisor is the backbone of every franchise business. Financial instability of the franchisor jeopardises the functioning of the franchisees also. In order to avoid such problems, franchisees need to be alert against the financial crisis of the franchis
Franchisor is not just the brainchild behind any franchise concepts; rather he is the life and blood of the entire franchise network. He instills a sense of direction and provides support to the franchisees to ensure success. Though franchising is said to be the proven business model yet the success is not guaranteed in franchising also. The franchise model can turn out to be a disaster, if the franchisor is not financially sound.
Franchisor’s financial instability
The most common cause for franchisors’ instability is the financial crises resulting due to:
Financial crises at franchisors’ end have direct impact on the franchisees. As Deepak Choudhary, MD- India, Greycells Education Limited, EMDI says, “If a franchisor is facing financial problems and he is not committed to the brand, then the franchisee will suffer.” The article therefore aims at raising an alarm among the franchisees to detect and determine the franchisor’s financial conditions and problems to secure the proper functioning of the franchising business. Therefore, it is of paramount significance for the franchisees to find out the warning signs of the franchisor’s credit crunch and accordingly act in order to avoid any dire consequences in the future.
The number of situations and activities that carried out by the franchisor can be a cause of concern for the franchisees. Here are enlisted the various warning signs that a franchisee must detect and react to:
If these signs are emerging, then it is time to approach your franchisor directly and confront the situation. As Pawan Gadia, CEO, Ferns N Petals says, “If the franchisor fails to fulfill his obligations, then it is a clear cut indication that the franchisor is in trouble financially.” If you will keep on speculating about the problems, then this might worsen the situation. So, it is always better to face the situation head-on by directly contacting the franchisor.
Franchisee’s take-on warning signs
Having identified the warning signs, franchisees can take necessary steps to avoid any pitfalls. To know how such situations can be handled by the franchisee, read the below mentioned franchise solutions:
Being a franchisee, you have taken the decision to maximize your profits with the help of the franchisor by taking-up the franchise business. Franchisor in case of financial instability may fail to effectively manage and operate the franchise network will also negatively affect the franchisees. So, keep your eyes and ears open to these warning signs and take immediate steps to circumvent problems that can ruin your franchise business.