One of the long-time statistics circulating in retailing is that 90 percent of franchisees succeed — a rate far higher than that of independent startups and other retailers. But is this figure correct or is it really the stuff of urban legend?
Entrepreneur, which publishes a lot of information on franchising, recently examined this issue and came to these conclusions:
“Imagine you’re thinking of leaving your job to open a business and decide to do a little research into franchising. A Google search may lead to an evenly balanced sermon on the pros and cons of franchise. ownership. Or you may land on this gem from About.com: ‘Some studies show that franchises have a success rate of approximately 90 percent as compared to only about 15 percent for businesses that are started from the ground up. The increased probability of success usually far outweighs any initial franchise fee and nominal royalties that are paid monthly.”
“Most experienced franchisees would laugh themselves hoarse after reading that statement. But what about a novice entrepreneur who is considering going it alone? That’s the type of thing that might get their heart set on franchising. Dig a little deeper and you’ll find that About.com is not alone in espousing such numbers. That claim and myriad variations are all over the internet, from business articles written by people who should know better to puffery put out by franchise brokers and consultants. It’s known as ‘The Stat’ — the notion that franchises have a success rate of 90 to 95 percent — and it has helped fuel franchise fever for decades. It’s also completely unproven.”
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Retailing: From A to Z 