Here is a list of the reasons that franchisors fail. Some of the following ingredients for franchisor failure will seem to be duplications in some situations and not in others. Many do not apply to many situations, various combinations apply and some can obviously be expanded upon. These are in no real order;

The financial model is unprofitable for the franchisor
The financial model is unprofitable for the franchisee
Poor standards producing poor product and/or service
Public perception of concept quality and/or value is poor
Poor marketing strategy
Product/service with a limited or declining market
Poor site selection
Franchise concept is flawed [general]
Poor franchise systems
Markets become saturated [competitors]
Markets become saturated [same brand]
Staffing developments - increased costs and/or available staff regression
Specific industry regulatory requirements are/become too expensive
Franchise network does not receive the necessary level of training, support and/or marketing
Poor administration systems
Lack of transparency
Franchisor disinterest in franchisee profitability and/or relationship
Annual rent increases swallow profits
Franchisor income streams destroy franchisee profitability
Franchise network too small to deliver the necessary level of training, support and/or marketing required for growth
Failure to adapt to market needs
Credit obstacles
Franchise support/training staff selection poor
Failure to address poor performing franchisees
Bad advisors
Media destroy reputation of the brand
Media destroy reputation of the franchisor
Regulator investigations destroy the reputation of the franchisor
Disclosure document destroys ability to sell franchises
Litigation level destroys reputation of the franchisor
Failure to grow network amidst increasing operational costs strangle franchise development
Failure to maintain/develop network consultative relationship
Weak franchisor
And my favourites ...

Poor franchisee selection
The franchisor is a psychopath
Rebellious franchisees destroy reputation of the franchise
You can now add to this list or you may argue redundancy. When I typed the word ‘bankrupt' into the BMM search it came back with 17 pages of hits. The results obviously didn't all relate to failed franchise concepts but there are many. That search will be worth checking at the end of 2009.

One thing is for sure; if due diligence of a franchise offering does not produce evidence of any these effects then you would expect to be on a ‘winner'. It should also be clear that an investigation of a franchise offering should not be limited to reviewing the franchise contract and the disclosure document and speaking to past and present franchisees.

When a franchisor eventually fails there is usually a long history of franchisees who failed before any combination of these effects caught up with the franchisor. A bankrupt franchisee will not bring down a franchisor but a bankrupt franchisor will probably see a trustee looking for a buyer where the franchisees' investment has been markedly diminished. When a franchisor fails he may have an off-shore account; when a franchisee goes under he/she usually sees everything go down and few families survive to reminisce about the bad old days.

How many prospective franchisees are capable of such a risk evaluation? How many 'professionals' are capable or prepared to undertake such risk evaluation?
http://www.bluemaumau.org/why_some_franchisors ...