franchipedia
articles
blog
podcasts
newswires 
forums
calendar
tools
Professor, is there a source where we can discover true franchise failure rates? I believe that it is a myth that franchises are significantly safer than, for instance, buying an existing independent business. Where is it reported when a franchisee sinks life savings into a franchise, it loses money, and he/she sells it to another franchisee at pennies on the dollar? Many thanks if you could point us to a source for this kind of information.
Mark (www.YourFranchiseMentor.com)
Startup Failure Rates,The REAL Numbers
Submitted by sas46 on Mon, 2008/05/26 - 18:47.
Proportion of New Businesses Founded in 1992 Still Alive By Year
There is a huge amount of misinformation on the Web about new business failure rates that gets cited and reproduced all over the place and that’s a problem for a host of reasons. Below is Figure 6.2 (p.99) from my book The Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By. The data come from a special tabulation by the Bureau of the Census produced for the Office of Advocacy of the U.S. Small Business Administration.
While these data look at the 1992 cohort of new single-establishment businesses, the failure rate percentages are almost identical for all the cohorts that researchers have looked at. So, these are pretty much the one through ten year survival rates of new firms.
These are the averages. There are considerable differences across industry sectors in business failure rates (see Figure 7.1 on page 113 of Illusions of Entrepreneurship), which is pretty interesting and important. But I’ll have to leave a discussion of what those are and why they exist for another blog post.
--
Prof. Scott Shane is the A. Malachi Mixon III Professor of Entrepreneurial Studies at Case Western Reserve University and author of The Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By
True Franchise failure rates
Submitted by Guest on Mon, 2008/06/02 - 20:55.
Re: True Franchise failure rates
Submitted by Truth in Franchising on Tue, 2008/06/03 - 05:55.
Well of course it is less risky to buy an exisiting independent or existing franchise business as opposed to any franchise or independent start up. And it may be safer in certain instances to buy a start up franchise as opposed to a start up independent business depending on the industry, branding, USP and barriers to entry.
The Truth Shall Set You Free!
TIF
franchised compared to non franchised
Submitted by Jenny Buchan on Mon, 2008/05/26 - 22:15.
Dear Professor Shane
I expect it would be of great interest to the bluemaumau community if you were to show us the graphs for franchised and non-franchised, and for franchisors still in business.
Many thanks, in anticipation.
Jenny Buchan, Australia
