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5 reasons why franchises fail

Research states that 50% of independent start-ups fail within the first 24 months of trading whereas only 5% of total UK franchises fail.

Franchise_fail

Winkworth’s average failure rate is lower than the UK franchise average at less than 2%. Over the 40 years that Winkworth has been franchising, it has honed its model and is constantly working to improve it's offering to the network of offices to ensure they are all as successful as they can be. Below we look at five factors that could decrease your chances of success and how Winkworth can help you avoid them.


1. Location

Winkworth is a high street only model and this works for the brand. It’s important to get the location just right for an office however for it to succeed; wrong location and people will simply forget about it. Although nearly all consumer product searches now begin online, the Winkworth offices act as subconscious advertisements for their clients on the high street. Winkworth’s new franchising team work closely with all new franchisees to find the perfect location for their premises. Requirements are often a boutique style office with a good level of footfall and or vehicle traffic.


2. Operating territory

Often estate agency franchised businesses offer franchisees ‘licences’ to operate in a certain area. They may also grant multiple franchisees overlapping licences, meaning that people are competing for the same business in the same area. This can decrease individual franchisees’ chances of revenue but guarantees the franchisors’ income. Winkworth doesn’t do this by strict ruling. Each individual office is granted an exclusive territory to operate in which no other Winkworth office is permitted to trade in. This ensures that the neighbouring offices work together in referring cross border business whilst the individual offices are guaranteed exclusive income.


3. Inadequate support from head office

Some franchised businesses promise high levels of support from their head office for all offices but once a franchisee is signed up, they find this is simply not the case. Some franchisors are so fixated with office growth that they have expanded without growing their internal systems simultaneously, therefore find they are not able to offer the same level of service to all their offices. Winkworth looks to grow its network of offices sustainably, and in turn grows and develops its head office support services at the same time. Winkworth invests every year in its physical and digital infrastructure so it can support each of their offices at the same level.


4. High franchise fees

Not all franchise companies have fixed franchise fees. These can be moveable fees based on level of revenue per office or are often increased yearly in line with the Retail Price Index. These moveable fees make it difficult to prepare a three-year cashflow forecast, which is a basic requirement for all franchisees to do and can therefore unexpectantly affect an office’s profit and loss. Winkworth however has always charged a flat 8% franchisee fee on all revenue from each office and this has never changed. This is also a non-negotiable fee, so all franchisees know that each of them is fairly paying the same percentage.


5. Inefficient marketing

It is not enough to simply open a new franchised business, rely wholly on the brand, and wait for clients to come to you. On the other hand, it’s a waste of vital finances to do a huge yet inefficient marketing campaign. Winkworth’s in-house marketing and PR department work closely with all new franchisees to design and diarise a strategic advertising campaign both locally and digitally that promotes the office efficiently and successfully during the first few months of opening.
 

If you would like to learn more about the opportunities that Winkworth have available to new franchisees and how to make the office a success, why not get in contact with the new franchising team today to find out more.

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