Why Buy a Franchise? - Franchising Statistics

Top 10 Reasons to Buy a Franchises

If you're still not 100% sure that frachising presents the best possible opportunity, here are ten good reasons to go ahead and pursue your dream of owning a successful business.

Proven business: Opening a franchise comes with the advantage of knowing that this business has been successful in other locations. The idea and process of running this business have already been proven. Therefore the learning curve in operating the business can be virtually eliminated.

Lower risk: Risk of failure is much lower with a franchise than starting a brand new business. There is a much higher likelihood of success if the same business has done well in other areas.

Established customer base: The brand name that comes with the franchise is already recognizable to consumers, without the franchisee (purchaser) having to spend a lot of money and time in establishing a new brand. The brand awareness provides security and trust to the customer who expects uniform quality to be provided. Therefore a customer base is already established.

Marketing: The franchisee can benefit from any advertising or promotion that the franchisor (owner of the franchise) does at the national or local level, without absorbing the cost. The franchisor can also provide input to the franchisee on a local marketing plan.

Initial and ongoing support: Training and support is provided by the franchisor. Since the franchise company has a vested interest in how well you do, ongoing training, system upgrades, product enhancements, and question and answer resources are provided. The franchisor offers experience to franchisee in such areas as accounting procedures, personnel and facility management, and business planning.

Exclusive territory: Rights are exclusive for the territory, with no other franchises sold in the same area as competition.

Ease of funding: Many times obtaining financing for a franchise is easier since the franchise name and reputation are usually recognized by the lenders. Therefore, banks are more likely to fund the franchisee.

Purchasing power: Relationships with suppliers are already established; affording the opportunity to buy in bulk, enabling a great deal of savings for the business.

Pre-purchase information and research: The potential franchisee can make an informed decision because of information that can be obtained prior to purchase. The Federal Trade Commission requires franchisors to provide the franchisee with certain information including the company's history, information about the officers, litigation history, audited financial statements, the franchise agreement, and a current list of franchises with owners' names and contact information.

Solid economic niche: Franchises cater to consumers' specialized needs. Consumers tend to prefer doing business with companies that meet their specific needs and the franchise industry has been fitting the bill.

Franchise Statistics

• Franchised businesses account for nearly 50% of all retail sales in the United States.
  
  
• The International Franchise Association has reported that franchising is responsible for 760,000 businesses, 18 million jobs, 14 percent of the private sector employment, and over $500 billion in payroll!
  
  
• From January, 2000 to December, 2004, the index that tracks the performance of the top 50 franchisors increased 34.5% compared to a drop of 20.1% in the S&P 500 over the same period.
  
  
• A 1999 study by The United States Chamber of Commerce found that 86% of franchises opened within the last five years were still under the same ownership and 97% of them were still open for business.
  
  
• A U.S. Department of Commerce study conducted from 1971 to 1997 showed that during that time less than 5% of franchise businesses were closed each year.
  
  
• A U.S. Small Business Administration study conducted from 1978 to 1998 found that 62% of non-franchised businesses closed within the first 6 years of their existence due to failure, bankruptcy, etc.
  
  
• Total sales by franchised businesses are projected to reach over $2 trillion, this year.
  
  
• 1 out of every 12 businesses is a franchised business.
  
  
• A new franchised business is opened every 8 minutes of every business day.
  
  
• In 2000, the median gross annual income, before taxes, of franchisees was in the $75,000 to $124,000 range, with over 30% of franchisees earning over $150,000 per year.
  
  
• According to the February 2005 article by the National Federation of Independent Business (NFIB), 1 in 4 small businesses with employees have their primary location at home, 85% of small firms are operated by owner-managers.