Lies, Damned Lies and Franchise Statistics
The oft-touted statistic that after 5 years the percentage of Franchises still in business is much higher than non-franchise start-ups is not borne out by anecdotal evidence. So what is the truth? Well much of the apparent discrepancy can be explained by a simple analysis of the way in which the numbers are sampled.
Staggeringly, the basis for franchise associations' surveys is polling of CURRENT franchisees only. This means that the very group that the survey is trying to identify, the franchises that have failed, are excluded from the survey.
The reason for the discrepancy between statistics reported by the franchise industry and independent studies, is difference in methodology. Surveys done by Franchise Associations are done by sending questionnaires only to existing franchisees. Which means that all those franchisees who couldn't make it work and sold their franchises are excluded from the figures. Only the franchisees who went bust and couldn't sell their franchises are taken into account.
How very convenient if the objective of the survey is to promote the sale of franchises!
Always be aware of these harsh realities when considering any franchise:
1. Many franchisees never make much money. Average profitability is poor, especially after taking into account the purchase price of the franchise. So take the hype used to sell franchises with a big pinch of salt!
2. "Studies" used to sell franchises are paid for by the franchisors. Don't mistake the information provided for balanced consumer guide information. It's a carefully engineered sales pitch. Getting hold of the information you need to make a rational buying decision is difficult, to say the least. So use your common sense and a healthy dose of cynical discretion.
3. Franchise agreements always favour the franchisor. It is very easy to be swept away in the heat of the moment and get into a binding contract that is not in your best long term interests. And it is very hard to get out of a franchise agreement without taking a big financial loss.
4. Remember, the main purpose of franchising is to make the franchisor wealthy. So be careful.
Related Tags: franchise, franchising, buy a franchise, buying a franchise, choosing a franchise, best franchise
Have a look at www.realworldfranchising.com for more information.
Gareth Williams is an advisor on franchising from the franchise buyers perspective. A past franchise owner he has real experience of franchising 'from the trenches'. He has written what many consider to be the definitive guide to buying a franchise. This is available from http://www.realworldfranchising.com
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