Why a Franchise?
Is Franchising for
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
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
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
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 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,