Future Franchise Buyers must always consider the Franchisor’s history in the area or territory that they are considering. If there have been franchisees that have gone out of business in the region for whatever reason, even if it is purely the downturn of the local economy, this could cause a problem. When customers see a franchisee of a brand name go out of business, it affects that brand name’s image.
Also you must consider if the previous failed franchisee went out of business due to poor customer service. Sometimes putting up a sign in a formerly closed location; “under new management” is not enough, even if the Franchisor allows it. The public does not forget when they see small businesses go out of business in their communities and that means there will be issues with brand in that neighborhood.
It might be wise to explain your concerns about buying a franchise and bring up the burned territory issue with your Franchisor during the sales process and ask them for a slight modification or attached agreement that would insure additional marketing and advertising in the region to make up for any brand name loss. For instance you might ask for a 3-time direct mailing to a ten-mile radius.
The first mailing to announce the new store opening and introduce you the new franchisee, then coupon promotions one each quarter for two additional periods and finally, you should ask for an insert coupon flyer in both the Chamber of Commerce newsletter and the newspaper after your business is fully up and running and you’ve dealt with the initial rush of new customers. Please consider this, it is a serious issue.