The franchising concept: what are the advantages?
Potential franchisees sometimes wonder if franchising is a necessary process, and may ask why they couldn't simply go out and start a business independently.
The findings of the International Franchise Association, a membership organization of franchisers, franchisees and suppliers, as reported in the August 15, 1997 Wichita Business Journal, suggest that franchisees enjoy a significant competitive edge over the stand-alone business operators.
They noted a study showing that 86% of franchise companies which opened in the previous five years were still in business under the same owner and only 3% of these businesses failed.
Conversely, a US Small Business Administration (SBA) Survey in that same article showed 62.2% of all new businesses started between 1978 and 1988 dissolved within their first six years.
The percentages of success may vary with the study. And while not all studies may reach the same conclusion, most suggest that the franchised businesses are given a higher chance of success than independent, start-alone businesses. Reasons contributing to this include:
- A franchise is a "duplicate" of an already successful business. The real value of a franchise is the experience, know-how, and operating plan that comes with it.
- With franchising, there is the value added advantage of name-brand recognition and a network of support.
- Franchisees avoid the costly trial-and-error period that causes so many start-up businesses to fail.