Why Franchisees Leave In Year Three

The first year of franchising is exciting. The second year is hard work. By the third year, many Filipino franchisees start looking for an exit.

The Three Year Squeeze

Franchise agreements often last for three years. When renewal comes, operators face new franchise fees and renovation requirements. If profit margins have shrunk due to rising overhead, this is when they leave. The initial excitement fades and reality sets in. Many realize that high revenue does not mean high profit. Choosing a brand with a strong ROI, such as the 12 month projection for Icy Pink Scramble, is crucial to surviving this renewal phase.

Ignoring Competition and Costs

The Philippine market is crowded. A new food cart can be popular for a few months, but then competitors arrive. If you are operating a chicken shop and three others open nearby, your daily sales will drop. Some franchisees also underestimate operational costs. They see the gross income but forget to calculate daily waste, staff turnover, and rising ingredient prices. This squeezed profit margin is a top reason for quitting before the next contract.

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Low Support and Poor Training

A franchise is meant to offer a proven system. However, if the franchisor provides minimal support after the initial launch, the operator faces problems alone. A successful, long-term business requires ongoing training and marketing support. If you are investing over ₱1M in food or retail, you must ensure the franchisor has a strong, dedicated team. A franchise that feels too hands-off will lead to operator fatigue, leading to a loss of interest by year three.

Focus on Sustainability, Not Trends

Many Filipinos fall for trendy, short-lived concepts. When the trend passes, the franchise becomes a liability. Look for industries with staying power, like bakery or specialized food shops. Businesses like Izsak Litson Manok Liempo Atbp or niche food carts often have better longevity than fads. Think about whether your chosen brand will still be popular in three years. Stability in operations is more important than a fast, short-term launch.