Franchise Statistics Debunked Again!

No doubt that a good franchise systems can reduce risk, speed up success, and help franchisees avoid the mistakes of others. But not all franchises are created equal. That's what Jean Samper writes in an enlightened post in Franchise Key International, called The myth of guaranteed success in franchising. In summary, Jean says, in franchising, no method, or magic formula can guarantee success.

If franchising means uniting a concept that has been successful and a dynamic and brave franchisee that has the right profile for the job and who has the right financing, the chances of success can be incredibly high. 

Here is the danger: A bad business model will not be saved by franchising it.

Let’s stop wondering if franchising is a good formula. Let’s concentrate on whether the business model is sound, if the franchisor is fair and legitimate, and if the franchisee has the right profile.

There are a number of brokers web sites out there that are publishing statistics about the success of franchising, what those brokers should be touting is the success of the business model they are representing.

Here are are some of the bogus statistics out there on franchise broker web sites: I have never been able to verify any of these bogus claims.

• A 1999 Study by the United States Chamber of Commerce found that 86% of franchises opened within the last 5 years were still under the same ownership and 97%  of them were still open for business.
• A U.S. department of commerce study conducted from 1971 to 1997 showed that during that time less than 5% franchise businesses were closed each year. Compare that to a U.S. Small Business Administration study conducted from 1978 to 1998, which found that 62% of non-franchised businesses closed within the first 6 years of their existence due to failure, bankruptcy, etc.
• In 2000, the median gross annual income, before taxes, of franchisees was in the $75,000 to $124,000 range, with over 30% of franchisees earning over $150,000 per year.
• US Department of Commerce/Industry and Trade Administration and Future Small Business in America Study says Franchises have a 90% success rate.
• Compare that to a U.S. Small Business Administration study conducted from 1978 to 1998, which found that 62% of non franchised businesses closed within the first 6 years of their existence due to failure or bankruptcy.

• http://www.franchisenext.com/inner/faq.htm
• http://www.gbizchoice.com/page/page/2765698.htm
• http://www.smartchoicefinancial.net/franchise/statistics.html
• http://dearbornwest.com/_wsn/page4.html
• http://www.stonebridgebusinessadvisors.com/franchising.html
• http://freefranchiseconsultant.net/FRANCHISE_STATISTICS.html
• http://franchise-sales-net.com/franchise_facts_and_statistics.asp
• http://www.careerpotential.com.yourtempsite.com/articles/franchising-information.html
• http://www.franchiseindustries.com/franchise_industries_franchises_for_sale_statistics.html