CHECKLIST - 20 Signs a Franchise Is Actually a Zombie

What’s that? It’s a franchise that looks good at first, but should be avoided at all costs. Here’s how to avoid buying a brand that’s a total dead end.

- ALICIA MILLER

Beware the zombie franchise.

It's the one that has stalled out, but still markets its opportunities as if nothing is wrong. Its brand relevance is typically shrinking; the number of open units is wilting. Previously loyal customers are being siphoned off by more innovative concepts. Underlying demographics may have shifted. Market trends could be working against the brand, yet management hasn't created a new path-and that managerial inertia or denial may be compounding the brand's problems. Unit-level economics are weakening, and an undercurrent of franchisee discontent is scaring away new franchise buyers and lowering franchise resale interest. Many existing franchisees would like to get out, if only they could-and expansion-minded franchisees look beyond the brand for better options.

From the outside, the zombie franchise may seem alive, but it's really dead.

New franchisees who miss those signals eventually realize their mistake. They may feel disclosures were inadequate or misleading. They often look back on conversations with franchisees and wonder how they didn't hear the negative feedback. They may remember sunny conversations with consultants, brokers, and the corporate team and feel duped. Or perhaps corporate is truly out of touch and doesn't even realize there is a problem! And if they do realize, often these brands spend significant money on branding and advertising to try to convince potential franchisees that they are still worthy of investment. They try to reinvigorate franchise unit sales, but not the underlying business. All the while, franchisee trust gets destroyed.