When doing research on “franchise success rate,” you may
come across some extremely high percentages of franchisees that have remained
in business over several years.
Jason Daley recently wrote an article for Entrepreneur
magazine talking about The Stat. The
Stat is the notion that franchises have a success rate of 90 to 95 percent,
which makes it seem like a no-brainer that everyone should look at franchising.
The number just didn’t come out of nowhere.
It’s based on a Department of Commerce
voluntary survey asking nearly 2,000 franchisors about their stats.
The results said that 5% of the units
closed.
The biggest thing to consider
with this survey – it was a
voluntary survey
that was not audited.
I wonder how many
unsuccessful franchisors reported their numbers accurately, if it all?
The franchising industry became heavily regulated decades
ago, after seeing many high-profile cases of misrepresentation and fraud. The
Stat just adds fuel to the fire.
Another thing to consider is that not all franchise
categories are created equal. Some types
of businesses have better success rates as than others.
So, why am I telling you all of this?
If you are expecting a guarantee
of success when considering a franchise, STOP the process now and focus on your
day job. There simply are no guarantees. However, if you’re willing and able to
take a calculated risk, there are things you can do to increase
your likelihood of success, such as finding the right franchise for you, in the
right geographic area, that fits your lifestyle and best leverages your
transferable skills.
FranNet
has a matchmaking system that truly considers you and your goals when looking
for a potential franchise match. In order to gather some hard data on
how effective that process is, FranNet looked at 1,500 individuals it had helped get into
franchised businesses between 2006 and 2010. According to the internal
research, 91.2 percent of the businesses were still open after two years, and
85 percent were operating after five years. But FranNet’s President & COO,
Jania Bailey, is quick to point out that those stats don't extend to
franchising in general--she attributes the high success rate to the FranNet
system. "Arguably, the time period we studied had the worst economic
conditions since the Great Depression," she says. "That success rate
speaks volumes about our ability to match a person and their skill set to the
right franchise concept."
There
are also many times where after taking all things into consideration, we
suggest that franchise ownership may not
be the right road for you.
All
of our consultations, events, workshops and webinars are FREE to you, and we
want to give you the most thorough information in making this decision.
In Conclusion
Going
back to the question posed in the title of this blog article, does franchising
truly have a 90% success rate? There
really is not a conclusive answer to that, and with over 3000 concepts
out there, it’s near impossible to quantify the success rate of the industry as
a whole. The good news is that once you’ve narrowed the field to a handful of
franchises that seem to fit your personal criteria, you’ll be able to look at
the track record for at the last three years of those specific companies you’re
investigating by reading the Franchise Disclosure Document prescribed by the
U.S. Federal Trade Commission.
But,
how can you increase your likelihood
of success? Do your homework and call
FranNet! Take advantage of our FREE
consultations, events, webinars and workshops and give yourself the best chance
of success.
