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Starting your own vs. Franchising

A common comment made at social events when I mention what I do is this – “Wow! That sounds great but I rather buy a franchise. You cannot go wrong with that.”

Really!!!!

Says Who???

Well off course the franchisers who are making billions selling them. And the magazines (Entrepreneur, Small Business Opportunity, Work At Home etc) that are raking in millions in ad dollars by promoting the same franchisers.

For me leaving your job to get a franchise is just getting a different boss – only this time the hours are mucho longer.

For the first time in my memory a mainstream publication has the guts to do a “real” story on true story behind franchising – FSB or Fortune Small Business has a terrific story about Risk in Franchising and who mid level executives are being sold into a dream of franchising being “risk free” while shelling out big dollars for buying dozens of territories at a time.

Well worth the read if you or your loved ones are contemplating the purchase of a franchise in the near future. I am not saying that all franchises are a losing proposition – they are not! But at the same time walk with your eyes open and don’t believe the hype that buying a franchise is 100% success and starting your own business is a recipe for disaster.

Here are some excerpts from the FSB story:

“According to the American Association of Franchisees and Dealers, companies that sell franchises go under at a rate of about 15% a year. That means, notes AAFD chairman Robert Purvin, that "in any given five-year period, 75% of franchisors disappear."

In the early '90s Timothy Bates, a professor at Wayne State University, studied Census Bureau data on 20,000 new enterprises and found that 38% of franchise units failed over a four-year period, vs. 32% of independent startups.

In some industries the gap was much greater. In retailing, for instance, 45% of franchised units lasted less than four years, while just 23% of independent retail stores flopped.”

You can read the whole story here in Fortune Small Business.


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Posted by Mark Ijlal on December 27, 2005 05:41 PM |

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