Buying a Franchise? Don't Believe The Hype!

For many prospective business owners, a franchise stands out as a low-risk option.

This perception is often based on the promises of high success rates and financial gains advocated by franchise companies, franchise trade associations and franchise consultants.

These assurances can be enticing, painting a picture of an assured path to financial prosperity.

However, it's crucial to pause, take a step back and assess these claims. Are the statistics surrounding franchise success accurate? Where does the data come from and how is it compiled?

Lies, Damned Lies and Statistics*.

You'll come across impressive statistics regarding how successful franchises are. These claims are made by reputable businesses, financial institutes and trade associations. An example of data you will see published widely in the UK is from a 2018 report published by the British Franchise Association and NatWest, which includes impressive numbers such as:-

• Only 1% of franchisors close per year due to commercial failure;

• 93% of franchisees claiming profitability for 20 years consecutively;

• 6 out of 10 franchises have a turnover in excess of £250,000.

Wow! Really?

That beats all other kinds of business, by far! And there are many more examples across the internet. It makes you wonder why every business isn't a franchise?

But I believe the reality is more nuanced and complex. In fact, there is a lack of clear and transparent research comparing franchise businesses with their non-franchised counterparts, or a clear understanding of who was surveyed to create the data.

Without concrete data to support these claims, the statistics can be misleading and oversimplified. Furthermore, the two companies that authored the report have a vested interest in selling franchises and the loans for buying franchises, which raises questions about the objectivity of their findings.

Buying a franchise is a significant financial investment and a leap of faith into the unknown. While there are plenty of success stories within the franchise industry, the path to prosperity is often paved with challenges and uncertainties.

The glossy brochures and persuasive sales pitches gloss over the failures and struggles faced by many franchisees.

It's essential to approach these statistics with caution and a healthy dose of skepticism.

Buyer Beware.

Every franchisee's journey is unique, shaped by factors such as market conditions, location, competition, personal dedication and the franchisor. Some franchises are very successful, while others are mediocre but never get mentioned in the rosy statistics and articles.

Understanding their success does not guarantee your success. It requires hard work, resilience, and a bit of luck is crucial for anyone looking to venture into the world of business and franchises.

Don’t rely solely on statistics. Instead, have a clear plan for conducting thorough due diligence. This should include:

• Researching the Franchise's Track Record: Look into the history and performance of the franchise over time.

• Talking to Current and Former Franchisees: Get firsthand insights into the daily operations and challenges.

• Seeking Advice from Industry Experts: Professionals can offer unbiased opinions and advice.

• Asking for Evidence to Back Claims: Request concrete data and examples to support any promises made by the franchisor.

By going beyond the numbers and delving into the realities of owning a franchise, potential buyers can make more informed decisions that align with reality.

Remember: most of the organizations distributing the information are selling something. Stay vigilant and make sure your decision is based on comprehensive research and genuine understanding.

Conclusion

As always be careful with any statistics or statements, even from what may seem like reputable sources. Approach with a critical eye. While they may provide insight into potential successes, dig deeper, ask questions, and push for validation.

Buying a franchise is no different. Make sure your choice is based on a thorough understanding and realistic expectations.

* Courtesy of Mark Twain.

Photograph courtesy of Jametlene Reskp (thank you!) see more of his work on Unsplash