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Franchising can be a great way to expand a brand, but success is not always guaranteed. As a franchisor, you are responsible for maintaining a healthy franchise network, responding to changing market dynamics and supporting franchisees to work effectively. This article will highlight some of the mistakes UK-based franchisors have made that led to the downfall of their franchises. By understanding these franchise failures, you can safeguard your brand from similar pitfalls and set your network up for success.
1. Blockbuster: Not Adapting to Evolving Market Conditions
Blockbuster stores were once a film rental giant in the UK. The stores offered a wide selection of films, video games, and other entertainment media for rent or purchase. However, the brand faced several challenges that led to its failure as a franchise. One crucial mistake the franchise made was not adapting to changing market conditions. Digital streaming services began to gain traction, and these sites became stiff competitors for brick-and-mortar stores.
Downloading and streaming films was far more convenient and often cheaper than visiting a physical rental store to rent a DVD and returning it some days later. Customers’ preferences quickly swung towards the convenience of streaming services. Despite being aware of these changing market conditions before their eventual demise, Blockbuster did not adapt quickly enough. It fell under the financial strain of maintaining physical stores with declining foot traffic.
Overall, Blockbuster’s failure as a franchise was primarily due to fierce competition and its lack of adaptation in the digital revolution. The crucial lesson from Blockbuster’s downfall is the importance of keeping up with changing market conditions. This example highlights the significant impact technological developments can have on a previously successful business.
As a franchisor, your market research should be a continuing project. Keep an ear to the ground by listening to your brand’s customers and communicating with your franchises. Maintain awareness of competition and respond to changing customer trends.
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2. British Home Stores (BHS): Poor Financial Management
BHS was a department store chain that offered various products, including clothing, homeware and electrical goods. However, it struggled with declining sales and mounting debts and collapsed in 2016. Similarly to Blockbuster, BHS did not adapt to changing customer preferences. A key player in BHS’s downfall was financial strain, and eventually, the owner sold the company for just £1.
The essential lesson from BHS’s downfall is that you must prioritise good financial management as a franchisor. This includes:
- robust financial planning;
- clearly stipulating fee structures in the franchise agreement;
- using funds carefully; and
- reinvesting in your brand.
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3. Burger King: Not Sufficiently Protecting Intellectual Property
The previous two examples have demonstrated how the inability to adapt and invest in a franchised brand can lead to complete franchise failures. This Burger King example is not a ‘failed franchise’ but a cautionary tale about protecting your brand’s intellectual property.
The Burger King brand emerged from the US and remains a successful franchise in the UK. However, due to a failure to sufficiently protect its intellectual property, the brand is instead known as ‘Hungry Jack’s’ by its Australian customers.
By the time Burger King franchisors tried to expand into Australia, somebody else was already operating a separate ‘Burger King’ restaurant chain in the territory. The existing Australian Burger King owner subsequently refused to allow the franchisors to purchase the trade mark, forcing the franchisors to rebrand as ‘Hungry Jack’s’.
This example demonstrates the importance of protecting intellectual property by registering your brand’s essential assets, such as trade marks and patents. Your brand’s trade marks distinguish it from others. If you are considering international expansion, you should protect your brand’s intellectual property rights in those territories.
Key Takeaways
Blockbuster’s inability to adapt to the digital revolution highlights the importance of adapting to changing market conditions. As the market adapts, you should continuously assess customer preferences to ensure your brand maintains its competitive edge.
As shown by the collapse of BHS, robust financial planning and management are crucial. You should reinvest in your brand’s growth and use funds carefully.
Moreover, Burger King’s journey to Australia highlights the value of safeguarding your brand’s intellectual property assets, including trade marks and patents. This will mitigate the risk of identity dilution.
Examples of franchise failures present invaluable lessons for franchisors such as yourself. You can safeguard your network and protect your brand by proactively addressing potential pitfalls. In doing so, you can set your brand up for sustainable success. Also, whether you are at the beginning of your franchise journey or are an established franchisor, seeking professional advice is highly beneficial.
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