A franchise is a less risky business model than starting from scratch; less risky does not mean out of risks.
Is it true that 90 percent of franchises are successful ventures?
According to About.com:
“Some studies show that franchises have a success rate of approximately 90 percent as compared to only about 15 percent for businesses that are started from the ground up.”
“The increased probability of success usually far outweighs any initial franchise fee and nominal royalties that are paid monthly.” Regarding this citation Entrepreneur.com responds “Most experienced franchisees would laugh themselves hoarse after reading that statement.”
The truth is that franchise success rates are somewhat different, according to a study made by Wayne State University with more than 20,500 small businesses 65.3 percent of franchises survived after four years.
These results may be interpreted or understood like after four years those franchises were still in the market and making enough money to keep in the business, which is not the same as saying that those franchises were making big profits or even profits. “Survival isn’t everything,” says Brian Headd from the Small Business Administration (SBA) Office of Advocacy.
Each case is unique, and success depends upon the performance of individual franchisees, not by the strength of the franchising model. As in any other business endeavor, success depends of such a variety of factors, among those, the decisive are related with the individual franchisee skills, experience, dedication and good practices (following the rules of the franchise).
Like in any other aspect of human performance, some people in franchising – we’ll call them the top performers – have done very well for themselves and some do not. Surprised?
Are franchise owners making profits? Most of them are doing well enough, probably around the 80 percent, some are losing it all, some are becoming top-performers (top-profits). . At the end success and profitability do not depend on the franchise but mostly on the franchisee.