Whether You Leave The Corporate World Into Franchising Depends

You asked, "Is franchising the way to go, rather than starting a business from scratch?" Here's my two cents worth.

The answer is yes and also no. It really depends on the franchise system that you buy a franchise in. Some franchise networks succeed better than others while other franchise systems might be worse than independents in their industry.

Intuitively, it makes sense that franchise systems have higher success rates than an independent business. An independent pizzaria most likely will learn the hard way that coupons are more cost effective if given door to door rather than placing full page ads in the newspaper. Franchisees benefit from already knowing that because someone made that mistake long ago. If you own a business then you have to re-invent the wheel. learn the hard way. In a franchise system, you have the benefit of being given an operational manual which has learned from the successes and failures of other franchises. However, you also have royalties to be paid that independents do not.

Studies on the failure rate of small businesses or the success rate of franchises vary widely. So, it is difficult to say categorically that franchising is more successful than independents. Some studies show that this is not the case. And of course, it is even harder to say that any one particular franchise will succeed more than an independent. That's not necessarily so. After all, any one particular franchise could fail while an independent succeed.

If you ever attend a franchise show, most likely you will hear franchise sellers quoting from old IFA figures of high success rates compared to independent operations. I've heard sales people pitch to me that 95% of franchisees are still in business after 5 years compared to 5% for independents. The IFA has asked franchise developers not to use those figures because they are faulty but the numbers are so attractive that sales staff have a hard time not putting it into their sales kit.

I still haven't answered all of your questions and only part of this one question. Let me do this. I'll answer your questions a little later in the week in a more lengthy article in the "general franchise" blog section.