Franchise Fallout

…markets aren’t like parties: No sane investor really wants to crash a crowded one. This is what the field of franchising is starting to look like. Dixon used to record roughly 350 business deaths each year, but after a more thorough housecleaning of his list last year, Dixon ended up dropping an astonishing 1,600 or so dead and dormant companies.

The Globe and Mail
April 26, 1996

Franchise Fallout
There may be a good reason why doughnuts have those holes
Kenneth Kidd

The odd frenzy aside, markets aren’t like parties: No sane investor really wants to crash a crowded one. This is what the field of franchising is starting to look like.

INFO Franchise News Inc. added 534 new franchisors, distributors and consultants to its annual directory last year.

This seems like a lot, but it’s barely half the 969 new entries recorded in 1989, when, as editor Ted Dixon puts it: “Everybody and his brother was franchising.” Now they’re leaving in droves. Dixon used to record roughly 350 business deaths each year, but after a more thorough housecleaning of his list last year, Dixon ended up dropping an astonishing 1,600 or so dead and dormant companies.

That helped bring the North American tally of active players down to 4,210 from 5,327 at the end of the 1994. Perhaps this shouldn’t surprise, given what John Lorinc discovered about the franchise-laden realm of doughnut shops in his book, Opportunity Knocks: The Truth about Canada’s Franchise Industry.

Ratio of Canadians to doughnut shops: 8,500: 1

Ratio of St. Catharines, Ont., residents to doughnut shops: 2,800:1


Risks: Survivability (franchisee and franchisor), Encroachment (too many outlets in area), Franchisor abandonment, Franchisor bankruptcy, Industry in disrepute, When the franchisor tanks, so does the franchisee, Canada, 19960426 Franchise Fallout

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