FranNet, a private franchised business consulting company that for 25 years has helped aspiring entrepreneurs achieve franchise ownership, has released a detailed survey of the success and failure rates of franchise businesses.
FranNet conducted a detailed survey of 1,260 franchises it helped open from 2006 to 2010. (FranNet consultants work individually with clients and use a specific profiling and consultative process to determine a business model unique to each person. Its services are free.) The survey showed that 91.2 percent of the franchises it helped open were still in business after two years.
Highlights of the FranNet survey:
Information provided: 1260 (77.16%)
Top performers: 180 (14.29%)
Closed overall: 190 (15.08%)
Closed before 2 years: 111 (8.81%)
Open longer than 2 years: 1149 (91.19%)
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The franchise systems in this survey range from home-based service franchises to retail and food concepts. There were some home health care brands, tutoring franchises, and a pretty wide variety in the mix.
FranNet did not release the actual brand names of the firms, but works with over 200 brands.
According to a special tabulation by the Bureau of the Census produced for the Office of Advocacy of the U.S. Small Business Administration a decade ago (the most accurate and recent data available on small business success rates), only 64 percent of small businesses survived the first two years of operation, and only half were still in business after four years.
By contrast, during the timeframe when FranNet studied small businesses, 85 percent of the businesses that it helped open were still in operation through five years.
FranNet’s survey, which covers the majority of the recent recession, shows that franchised businesses enjoy success 42 percent more often than small businesses. (But keep in mind that success in this survey is measured in terms of business survival, not necessarily in terms of profits.)
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“Accurate small business and franchise success rate data are very difficult to come by,” said Jania Bailey, President and COO of FranNet. “It is often speculated that franchises are less risky and have a higher success rate than most small businesses, and we are excited about the implications our survey brings to light.”