Hey folks,

Picture this: 9,000 stores. 84,000 employees. $6 billion in annual revenue.

And then… bankrupt.

That was Blockbuster Video. And if you think their story is just “Netflix ate their lunch,” then you're missing the point.

Because Blockbuster had all the key advantages: brand recognition, customer loyalty, cash flow, and retail locations. But they still failed. 

So anyone considering a franchise investment should look at what actually went wrong, so you don’t make a similar mistake.

Let's break it down.

A lot of people think they're paying franchise royalties for brand recognition.

Here's the truth: Outside of a handful of household names, most franchise brands don't have real national recognition. And even if they do, it’s not enough.

Blockbuster had serious cultural dominance. Families made "Blockbuster night" a Friday ritual.

And it didn't save them.

So when you're evaluating a franchise, don’t put too much weight on the name. 

Ask yourself: Am I confident in the leadership? Are they making smart, forward-thinking decisions? Are they positioned on the right side of industry trends?

Because a big brand today can be a cautionary tale tomorrow.

Franchisors love to say, "We've got a proven system." And a track record is great. 

But when a franchise gets stuck in their systems ("it works, so why change it?") you're in trouble.

Blockbuster launched Blockbuster Online in 2004 to compete with Netflix. It was working. They were gaining subscribers. But the board got nervous about short-term losses and pulled back.

Meanwhile, Netflix launched streaming in 2007.

Your takeaway: during validation, don't just look at the systems. Ask: How does leadership approach innovation? Are they data-driven or ego-driven?

Because in franchising, you're pooling resources with hundreds of other operators. That should give you a huge advantage to evolve and adapt. But only if the franchisor is willing to lead that charge.

One of the most expensive business mistakes ever: Blockbuster turning down Netflix's $50 million partnership offer in 2000.

The CEO thought DVD-by-mail was a niche that would never threaten retail dominance.

Franchising is a game of partnerships. How does the franchisor work with vendors? Referral partners? Other brands?

And critically: How selective are they with franchisees? If you look around during validation and the other prospective owners look questionable, pay attention. It means they're not selective. 

If they can't bring on good franchise partners, can you trust them to execute smart strategic partnerships at the macro level?

Blockbuster had loyal customers for decades. Families, traditions, nostalgia, the whole deal.

And as soon as Netflix and Redbox offered something more convenient, those customers were gone.

Two takeaways here:

Even if you're entering a market with entrenched mom-and-pop operators who've been around for 20 years… so what?

Blockbuster had a decade-and-a-half head start on Netflix.

Who won?

The video entertainment industry didn't disappear. It's bigger today than it was at Blockbuster's peak.

But the industry shifted away from their business model. And Blockbuster failed to adapt.

I see this all the time in franchising: an industry is growing, but a specific franchise isn't positioned to capitalize on that growth.

Maybe their product is in a shrinking segment. Maybe their delivery model doesn't align with customer preferences. Maybe their cost structure makes them uncompetitive.

So don't just look at industry size. Look at trajectory.

Make sure the franchise you're buying isn't just in a strong industry, but positioned on the right side of where that industry is headed.

Blockbuster's story isn't just a cautionary tale. It's a checklist.

Before you sign a franchise agreement, ask yourself:

Brand recognition and customer loyalty won't save you if the fundamentals are broken.

Want help finding a franchise that checks all these boxes? Book a free strategy call with me.

Thanks for reading,
Connor

P.S. If you have at least $100K in liquid capital and you're serious about exploring franchising, let's talk. Grab a time here.