Detailed survey results prove 42 percent higher success rate for franchises over startups
Need proof that FranNet helps entrepreneurs not only go into business but thrive?
We’ve got it, from a survey we conducted — and it’s some of the most exciting statistical information about the franchise industry we’ve seen in years.
The survey shows that 91.2 percent of the franchises we helped open from 2006-10 remained in business after two years, and 85 percent were still in business after five years.
Those are absolutely staggering numbers that way surpass any other small business success rate. They also represent a critical statistical benchmark in an industry that suffers from a lack of good, solid information about the likelihood of small businesses to succeed.
Until now, the best concrete information we had was, incredibly, about a decade old. In 2002, the U.S. Small Business Administration’s Office of Advocacy asked the Census Bureau for a special tabulation that showed the success rates of new businesses founded in 1992 over time; what percentage was still in business after one year, two years, five years, etc.
The data showed that 64 percent of businesses that opened in 1992 were still in business in 1994; 50 percent in 1996; and only 29 percent in 2002. For years, although it was generally accepted that franchises survived at a much higher rate than startup businesses, we didn’t have any hard data to back it up.
Now we do. We recently finished a detailed survey of 1,260 franchisees who consulted us before they bought their franchise businesses. Again, do the math — 64 percent two-year success rate for businesses, according to the Census; 91 percent for franchises FranNet helped. Over the first five years, half of businesses fail. Those that consulted with FranNet beforehand survived at an 85 percent clip. What’s more: Of the franchises we helped open, 15 percent became top performers in their franchise systems.
What’s especially impressive is that the Census figures cover a period of relatively high times, the boom years of the 1990s, when the chances of business success were pretty good. By contrast, the FranNet survey years of 2006-10 encompassed the worst economic climate since the Great Depression — and our franchises still performed spectacularly!
Naturally, we’re thrilled because now we have a sound statistical foundation for what we’ve been saying for the 25 years we’ve been in business as a franchise system ourselves: that franchising is a nearly foolproof way for an entrepreneur to build a fulfilling career and realize the benefits of self-employment.
Franchise ownership is on the rise. The International Franchise Association has predicted that more than 14,000 new franchise units will open in 2012, creating 168,000 new jobs. FranData, a franchise consultancy firm that collects industry data, reports that the average franchise unit produces 10 new jobs. The better systems, training and brand awareness of franchise systems produce both a better financial investment and less risk for anyone thinking about opening a new business.
Franchising is an increasingly attractive option for so-called “corporate refugees” tired of the unpredictability and rigidity of their jobs and longing to seize control of their careers. Franchising appeals to them because franchise systems have already worked out the blueprint for running the business, greatly increasing the chances of success.
And the results are showing. We posted a record year for franchise openings in 2011 and, in the first quarter of 2012, we helped 33 percent more people start a business than the year before. Our clients don’t just survive. They thrive.
Want to see for yourself just how much sense owning a franchise business can make? Visit us at www.frannet.com.