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People close their businesses for a number of reasons.  I had one client who bought a franchise and poured time and money into it, but it grew slowly.  Unfortunately, too slowly.

The original idea was that the business would start slow and grow to provide an income for the family and allow for the flexibility to tend to the small kids.  Which is why they choose to purchase a franchise.

Things did not go as planned; the franchisor demanded and took large royalty payments every month.  Initially it was a fixed amount and then it was modified to a percentage of gross sales.  All hope for profit evaporated because the franchise was a labor-intensive endeavor.  If you grow you need more people and more people bring greater costs.  Ultimately everyone was getting paid but the owner.

So, the franchisee decided to shutter the business.  While there are no further business expenses, there are still the basic royalty payments due, until the ten-year contract expires.

The franchisor wins and the franchisee continues to lose.  Which is one of the reasons I am not a fan of franchises.

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