British Love Bogus Franchise Myths

Franchise myths have found a home in the United Kingdom. Clive Houlston is managing director of franchisor Mr Electric UK & Ireland and is also on the board of the British Franchise Association. He says:

“Recent research demonstrates that of all the businesses starting today, only 20 per cent will still be trading in five years time, as inevitably starting a new business comes with a steep learning curve, whereas franchising reduces this learning period dramatically as other’s past experience can be used to help those starting out.

“As a result, a reassuring 80 per cent of franchises will still be trading in the same five year period, which highlights the tried and tested franchise formula.” [Franchising Could Safeguard SMEs through Credit Crunch, Birmingham Post]

Of course, "still be trading" could mean that franchise owners have changed hands five times, each losing 90% of her investment. The shop still stands, but now with new management / owner. The phrase certainly cannot mean the original franchise owners retains his business 80% of the time. In the aggregate, that's unrealistic, even if the island nation of Britain were ideal for franchises. Both franchisors and franchises collectively fail at the same rate as small business failures.

Here are the actual small business failure rates.

The trick is to separate the gold from the fool's gold, to find the franchise systems with significantly better success rates.

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Related reading:

• What is the success rate of a franchise versus an independent?