WE'RE PARTNERED WITH OVER 600 FRANCHISES
What is a Franchise?
A franchise is simply an agreement between two independent parties, the franchisor and the franchisee, who choose to go into business with one another. The franchisor grants the right to use its trademark, products, and operating systems to the franchisee in exchange for a fee and ongoing royalties.
The franchisee operates the business using the franchisor's proven systems & business model, while also following the guidelines set by the franchisor. The franchisee benefits from the franchisor's established reputation and proven success, while the franchisor benefits from the franchisee's efforts to grow and expand the brand while earning a royalty.
Advantages of Franchises
- Established brand recognition
- Proven business model
- Training and support
- Access to established systems and processes
- Marketing support: The franchisor often provides marketing and advertising support, helping to drive business to the franchisee.
- Collective buying power: Franchisees may be able to take advantage of the franchisor's collective buying power, securing better deals on supplies and materials.
The TRUTH About Franchising
Many in the franchise industry claim a 90% to 95% success rate for franchisors. Wow! But is it true and based on evidence? No.
The most accurate data comes from a 5-year study by Frannet, who surveyed 1,500 franchises between 2006 and 2010. Out of those 1,500 franchises, about 92% were still open after two years, and 85% were in operation after five. In contrast, the Bureau of Labor Statistics reports that about only 80% of independent businesses stay open after two years. Great, but there's a "but."
The numbers, though accurate (and dated), can still be misleading. Certain franchise brands, industries, and markets can have significantly higher failure rates. So how do you know which options have the best track record?
That's where we come in.
Franchise Industry Stats
- According to FranNet, annual sales revenue for franchises is higher than the annual sales revenue of non-franchise businesses by a margin of $6.5 million to $4.7 million. Franchises also account for almost 3% of total gross domestic product (GDP), generating economic output of over $760 billion.
- According to Statista.com, in 2022, it was estimated that there will be some 792,000 franchise establishments in the United States, with an economic output of roughly 827 billion U.S. dollars and the number of employees totaling almost 8.5 million people.
More Franchise Industry Stats
- About 65% of all franchise owners are men. However, female franchise ownership jumped by 38% over the past decade, and of all new franchises opened in the last two years, 32% are owned by women.
- 10.5% of all businesses are franchises, according to the U.S. Census Bureau
- About 14% of all franchisees are veterans
- More than 300 companies begin franchising operations each year (Frankart Global)
- Franchise failure rates can be as low as 0% and as high as 90% according to Forbes
The Future of Franchising
As markets constantly ebb & flow and job uncertainty lingers in the minds of many in the corporate world, the demand for soup-to-nuts, businesses-in-a-box will continue to grow. Franchises, which, to varying degrees, are proven systems, will help meet this ever-increasing demand.
The issue is that the “hot franchises" garner much more attention than what is stable, built to last, and growing responsibly. While it's important to be aware of trending consumer patterns, it's absolutely critical that the franchise have a strong, adaptable leadership team in place. And even more crucial than all of that is the relevance of each franchise offering to the transferrable skills, backgrounds, and financial & lifestyle goals of their prospective franchisees.
The most imortant things for prospective franchise buyers to consider in this new era of the Great Resignation is not to wonder "what's hot" but "what's SMART," as well as "what's RIGHT" for me and for my family.
Franchise Vs Independent Business
Pros of Buying a Franchise:
- Established brand recognition and reputation
- Proven business model with a track record of success
- Training and ongoing support from the franchisor
- Access to established systems and processes
- Financing assistance may be available
- Marketing and advertising support from the franchisor
- Collective buying power
Cons of Buyin
Pros of Buying a Franchise:
- Established brand recognition and reputation
- Proven business model with a track record of success
- Training and ongoing support from the franchisor
- Access to established systems and processes
- Financing assistance may be available
- Marketing and advertising support from the franchisor
- Collective buying power
Cons of Buying a Franchise:
- Limited control over business operations and decision-making
- Royalty payments to the franchisor
- Strict adherence to franchisor's guidelines and standards
- Limited room for creativity and innovation
- Potential conflicts with the franchisor
- Dependence on the franchisor's success and ability to stay relevant in the market
Pros of Starting an Independent Business:
- Complete control over business operations and decision-making
- No ongoing royalty payments to a franchisor
- Unlimited room for creativity and innovation
- Ability to differentiate and stand out in the market
Cons of Starting an Independent Business:
- Lack of established brand recognition and reputation
- No pro
Pros of Starting an Independent Business:
- Complete control over business operations and decision-making
- No ongoing royalty payments to a franchisor
- Unlimited room for creativity and innovation
- Ability to differentiate and stand out in the market
Cons of Starting an Independent Business:
- Lack of established brand recognition and reputation
- No proven business model with a track record of success
- No training or support from a franchisor
- Difficulty in establishing systems and processes
- Challenges in securing financing
- Increased responsibilities for marketing and advertising efforts.