Why Do Franchises Fail?

Why franchises fail (and how to avoid it): Real talk from franchise experts

Franchising is booming. With over 800,000 locations and $800 billion in economic impact across the U.S., it’s no wonder entrepreneurs see it as one of the safest bets in business.

But here’s the truth: Not all franchise brands are built to last.

In this episode of "The Sidekick Life," hosts Ryan Zink and Tyler Altenhofen break down the real reasons why franchise brands (not just franchisees) fail. From leadership failures to poor systems, they shine a light on the red flags every prospective owner should know before signing on the dotted line.

Let’s break it down.

The 3 types of franchise brands (and why it matters)

Before diving into why franchises fail, it’s important to understand the three broad categories of brands:

National brands: Think Subway, Quiznos or Boston Market. These are the ones you recognize.
Emerging/regional brands: Often newer, with some momentum but less proven scalability.
Micro/non-starters: Brands that technically filed franchise disclosure documents but never really got off the ground.

Spoiler: This episode focuses mostly on emerging and national brands, the ones that matter most to prospective franchisees.

Myth: 300 franchises fail each year

Yes, roughly 300 franchisors stop filing FDDs annually. But that doesn’t mean 300 viable businesses collapsed. Many never sold a single franchise. Some were just experiments that didn’t take off.

What you should really ask:

Did this brand ever truly have momentum? Or was it just a legal entity with paperwork?

National brand failures: What really happened

You’ve probably heard about the fall of major brands like:

Quiznos: 5,000 units down to ~150
Blimpie: From 2,000 to ~100
Boston Market: Once over 1,000, now under 30

These stories make headlines. But the reason for their collapse isn’t about franchising as a model, it’s about leadership.

Common failures in national brands:

Greedy franchisors (like Quiznos) squeezing franchisees with unfair pricing
Bad real estate strategy (Blimpie choosing B-locations over A-locations)
Failure to adapt to shifting consumer preferences (Boston Market's outdated offering)

Takeaway: Big brand doesn’t mean safe bet. Even national franchises can fall apart if leadership lacks vision or alignment with franchisees.

The real risks in emerging brands

This is where most aspiring franchisees play and where the biggest risks and rewards live.

Here are the key reasons emerging franchise brands fail:

1. They franchise too early

Many founders jump to franchise before testing their model with others. If a business can’t be replicated outside the founder’s personal involvement or local market, it’s not ready.

2. Poor leadership commitment

Founders who want to “keep running the business” while launching a franchise brand are a red flag. You can’t scale a franchise while still being a full-time operator.

3. Broken economics

If franchisees are expected to invest $300K+ to make $60K/year with no salary – that’s not a business. That’s a job. And a bad one.

4. Overly aggressive development schedules

Brands that force franchisees to open multiple locations in 6-12 month windows risk collapse. Growth without stability is a recipe for disaster.

5. Unscalable systems

Supply chain problems, limited vendor access or geographic restrictions can sink a brand that’s growing too fast without infrastructure.

6. Licensing and legal blind spots

From contractor licenses in California to medical director requirements in wellness concepts, lack of regulatory readiness = massive delays and risk.

7. Weak financial backing

If the franchisor doesn’t have access to capital – or is hiding a weak balance sheet behind a parent company – you might be stepping into a financial time bomb.

Franchising vs. independent business: Why it still wins

Franchising isn’t a magic bullet, but it’s a safer starting point.

Ryan’s analogy nails it:

“I don’t have stats on how many people survive motorcycle crashes because they wore a helmet, but I know wearing one makes you safer. Same goes for franchising.”

✅ The franchise model does work
❌ But not all brands follow the model well

How to protect yourself: Franchise Sidekick’s approach

Franchise Sidekick exists to help people make smart, informed franchise decisions.

Here’s how we do it:

Certified advisors (2,000+ hours/year in franchise research)
Brand vetting: We screen for leadership, economics, scalability, and red flags
Validation guidance: We teach you what to ask existing franchisees
Insider info: Access to real data and relationships you won’t find online
Commission-backed guarantee: We put our money where our mouth is for top brands
Exit value maximizer: Helping you sell the business at the best multiple when the time comes

Best of all? Our services are 100% free to the buyer.

Final thoughts: Franchising isn’t failing, it’s evolving

Franchise failure doesn’t mean the model is broken. It means due diligence is more important than ever. With the right strategy, the right advisor and the right mindset, you can avoid the traps and own a thriving business.

Listen to the full episode of "The Sidekick Life" for more insider stories, proven strategies and franchise wisdom you won’t hear anywhere else.