Looking for a Franchise? Watch Out for the ‘Churners’

Franchise Churning is a term that seems to be popping up more and more frequently.
The definition, as I understand it, is the supposed practice of franchisors selling a franchise, even though they are reasonably certain that the franchise in question will not be able to survive, either because of the location, or perhaps because of the personal profiles of the person(s) who bought the franchise. The motivation is supposedly to earn the substantial franchise fees again and again from re-selling the franchise to new franchisees.
My take on churning is that it is not as frequent as the conspiracy theorists would have us believe. I can however imagine the scenario in a failing franchise system. Either a poor business model or a badly managed operation will result in poor cash-flow, low morale and such a difficult operating environment that a fix will be hard to pull-off. As franchisees fail and their assets become available for pennies on the dollar. it would be almost impossible to not see the promise of fresh fat franchise fees as being a possible way out of the mess.

Throwing all of your energy into selling franchises for the up-front franchise fees is, I imagine, a far easier task than addressing the systemic failure of the business model.
There are other pressures at work too. No franchisor wants to see one of his franchised outlets boarded up, it is simply too damaging for the brand. So finding a buyer for the failed location will of course be a top priority and you will want the old out and the new in as quickly as possible. Overnight, if possible.
So while there are some heart-wrenching stories out there of huge personal losses and of badly behaving franchisors, sometimes it is best to think of business as a war zone. Have a battle plan, understand the consequences of failure and don’t ever give up. Do try to keep a modicum of civility and a sense of humor, though

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