Coattail Effect: A Practical Guide For Small Businesses

In franchising, the coattail effect refers to a situation where franchisees who are prosperous and doing well may be forced to shut down due to the failures of franchisees who own a franchise of the same brand. Because of this, poor service, shabby locations or inferior products delivered by other franchisees can impact the entire chain. Coattail effect is the political phenomenon of a popular political leader attracting votes to other candidates from his party.

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Usually refers to a popular presidential candidate aiding the election of other candidates of his part, meaning that the other candidates are carried into office on the coattails of the presidential candidate. Coattail ambushing or coattail effect is when a brand puts effort into connecting itself with an event or competition by using a link instead of becoming an official sponsor of the game. The actions of other franchisees have an impact on your future growth and profitability. Due to this coattail effect, you could be forced out of business even if your particular franchise has been profitable.

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When a franchise experiences the coattail effect, this means that other franchises of the same brand are failing or doing poorly. Due to the performances of those other locations and the loss of reputation for the brand, you may see a drop in sales and the number of customers coming into your store. A franchisee will encounter coattail effects from the first day they enlist the franchise business, especially since the practices of both the franchisor and other franchisees will influence how the business is perceived in general.

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