According to the U.S. Department of Commerce, 80 percent of all non-franchised small businesses fail—many within their first year of business. In contrast, less than 3 percent of all new franchises fail in their first year of business, and approximately 90 percent are still operating after ten years. Erwin J. Keup, author of the Franchise Bible, states that the statistics are even better, with less than 2 percent of new franchises discontinued over the first three-year period. In the world of franchising, this comparison of business success to failure between franchised businesses and non franchised businesses is called “the franchise advantage.”

Stated in relevant terms, a small business that is not in a franchise system is four and one-half times less likely to succeed than one that is. In addition, the few small businesses that are not franchised but do succeed earn only 80 percent as much as their franchised counterparts. With these statistics, if you are thinking of going into business for yourself and you want to optimize your chances for success, you can hardly ignore the over-whelming advantages the franchise system offers.

Advantages of Joining a Franchise

In the United States franchising has become the most efficient operational method for guaranteeing the success of a small business. The major advantage of joining a franchise is the higher chance of success as indicated by the statistics of the franchise advantage. Specifically, the reasons for this are:

• Established name recognition. Consumers are usually familiar with the franchise name or its trade or service marks.
• Co-op marketing. The franchisor and its franchisees pool their resources in developing advertising and promotional programs at low cost. This allows a franchise system to project a strong image of a large independent company for each of the franchisees.
• Bulk purchasing power. Collectively, franchise outlets have a stronger purchasing power than small independent businesses. This gives them an economy of scale that translates into lower cost of goods and services.
• Training and training time. The franchisor trains franchisees to operate an efficient business format that has taken years and substantial dollars to develop and replicate. The training period to teach this proven method of operation is a relative short time, usually measured in weeks.
• Management experience. The franchisor provides its wealth of management expertise and assistance to its franchisees because the franchisor has a vested interest with its success directly linked to its franchisees.

Other support assistance. Besides training and management, the franchisor routinely offers other support services included in the ongoing royalties, or at very low cost.