Why franchisors fail (Lessons from the Titanic) 

The collapse of Kleins and several other insolvencies of both small and large franchisors so far this year has thrown the issue of franchisor failure into a rarely illuminated spotlight. Franchisor failure is an unsavoury topic which participants in the sector rarely discuss publicly.  

Like a sinking ship, a franchisor failure often creates a suction that drags surviving franchisees down with it, leaving only a small amount of wreckage on the surface to identify that the system ever existed (such as a vacant store, a painted-over sign, or a Yellow Pages ad). But this flotsam associated with the tragedy of a system collapse is rarely visible years or even months after the event.  

The Titanic, an “unsinkable” passenger liner which became the greatest maritime disaster of all time, sank with its lights on and engines running. Franchisors can also sink in a similar fashion. Up until a just a few days ago, the website for Kleins was still touting the franchise’s virtues as a business opportunity. In comparing franchisor failure with the sinking of the Titanic, there are some surprising similarities. Here are just three: