Franchise Statistics

More than 550,000 franchise businesses dot the American landscape, generating more than $800 billion in sales. With a new franchise business opening somewhere in the U.S. every 8 minutes each business day, franchising is indeed an ongoing success story.

If you are the type of person who wants to own your own business and be your own boss, there’s a place in franchising for you. 

The opportunities available in franchising are drawing people from every walk of life. Corporate and professional people are buying franchises every day. Young people, just out of college, are considering franchises. The number of women and minority franchise owners is increasing dramatically. Investors at all levels are finding that few financial investments can compete with the potential of a good franchise.

Franchising is especially attractive because it offers a good opportunity to people with various levels of capital and experience. Small business people are attracted, not only for the chance to be on their own, but also for the chance to do so within an established system. Retired people from many fields find that franchises are an excellent way to stay active and a good source of retirement income.

Franchise owners like franchising because they can be in business for themselves but they’re never left by themselves, the franchisor is always there to help. Franchisors like franchising because it is the best growth system ever devised.

The public likes franchising because franchised stores offer known names and dependable standards of quality. And that’s the real reason for franchising success—the customers give it their wholehearted support at the cash register.

For all these reasons, there has never been a better time for you to think about owning a franchise business. There’s never been a better time to go into business and there’s never been a better way to go into business than franchising.

• One of every 12 business establishments is a franchised business

• There are more than 3,000 companies offering franchising opportunities in the United States alone, covering more than 75 different industries.

• Franchise establishments employ more than 8 million people.

• In 1992, franchises accounted for $803.2 billion in sales, 40.9 percent of all retail sales. Total annual sales could reach $1 trillion in the year 2000.

• In 1991, franchising sales exceeded the growth of the U.S. economy as a whole by more than 500 percent.

• In 1991, there were 542,496 franchises, which was estimated to grow to 558,125 by the end of 1992, A new franchise opens every eight minutes of each business day.

• According to a 1991 study by Arthur Andersen and Company, nearly 86 percent of all franchise operations opened in the previous five years were still under the same ownership. Only 3 percent of these businesses were no longer in business. In contrast, the U.S. Small Business Administration reported that from 1978 to1988, 62.2 percent of all new business were dissolved within the first six years of operation.

• A 1992 Gallup survey indicated that 94 percent of franchise owners considered themselves to be successful, and 75 percent would repeat their franchise again. By comparison, only 39 percent of Americans would repeat their job or business.

• A 1991 Gallup survey indicated that franchise owners reported an average pre-tax annual gross income of $124,290. By comparison, the U.S. Census Bureau reported that the average American adult earned $22,333 in the same year.

Franchise vs. Independent Business

If a picture is worth a thousand words then the chart below must be worth a million bucks! The chart, which is based on a survey by the U .S. Commerce Department, shows the percentage of businesses still operating after the first year, after five years, and after ten years. The study shows that franchise businesses still operating after the first year -compared to independent businesses -is 97% to 62 %. After five years, the comparison is even more telling -92% of franchised businesses are still operating, compared to 23% of independent businesses. After ten years. 90% of franchised businesses are still operating. compared to 18% of independent businesses.

This chart tells me two things: (I) A franchised business offers a great deal more stability and security to the owner, operator and investor. (2) Franchising offers businesses that want to grow a method of expansion and development that has a greater chance for success over the long term. In short. franchising gives individuals the opportunity to go into business for themselves with an excellent chance of success at a minimum of risk. It gives businesses the opportunity to expand on a far greater scale, with greater speed, and with significantly less capital requirements.

Franchising in recent years has become a major part of the American economy. Franchised businesses now account for one-third of all retail sales, more than $590 billion. There are more than 498,000 franchised outlets employing more than 7 million people. The American concept of franchising is expanding rapidly throughout the world.

The overwhelming success of franchising is not based on any secret formula or magic trick. It is based on ingenuity and hard work. It is based on creating and developing an excellent idea for a product or service that is needed by millions of people. It is based on developing this concept into a complete system of doing business that can be taught to other business people, and that can be replicated in business locations from Bangor, Maine, to Bangkok, Thailand. The franchisor applies his expertise, experience and capital to developing a trademark and a complete system of doing business. The franchisee receives assistance with site selection, personnel training, business set up, advertising, and product supply. The franchisee pays an up-front franchise fee and an on-going royalty which allows the franchisor to provide more training, research and development, and marketing support for the entire business.

The reason that franchised businesses are still operating after five years, ten years, and even longer, is because of the unique combination of all the right elements that businesses need to prosper and thrive -brilliant ideas, commitment to the long-term, a good source of capital, and a lot of hard- working people. As the governments of the world and big corporations look around them for a solution to the pressing economic problems of our times, they would do well to study the franchising method. Our track record is impressive.

Source: Richard T. Ashman
Chairman, International Franchise
Association Vice President,
Public Affairs,
Holiday Corporation