The International Franchise Association (IFA) and Oxford Economics have teamed up to produce a report on the value of the franchising industry in the U.S. Whilst this report and findings are solely focussed on the US, it does provide significant data that supports and transpires across the pond.
Franchising as a path to entrepreneurship
- Franchises report sales 1.8 times larger and create 2.3 times as many jobs as non-franchised businesses, on average. This statistic cuts across all demographics too; black-owned franchise businesses earn 2.2 times as much in sales than black-owned non-franchised businesses on average
- 21 per cent of franchise respondents report being capital constrained when starting their first franchise business and that being a franchisee provided them with access to capital. 42 per cent of respondents received access to capital support
- 32 per cent of respondents claim that they would not have been able to own their own business without the franchising model
- This proportion is even greater among female owners and owners for whom a franchise was their first business (39 per cent)
- 29 per cent of franchisees opted for the model because they were ready to be their own boss
- 17 per cent of independent businesses are owned by people of colour, compared to 26 per cent of franchises being owned by people of colour.
Franchising has often been considered the easiest and most accessible path to entrepreneurship, and the figures prove this. Franchisees opt for the franchise model for the numerous economic benefits (marketing, ready-built brand, procurement) that can more easily facilitate running a business.
“Depending on what statistic you look at, around 80 per cent of independent businesses fail where 80 per cent of franchise businesses succeed. When you have a franchise, you basically are buying into a proven, predictable system,” said Rowe.
“Success leaves clues in in any system. You’re going to find the best and the worst across the spectrum, but you can at least look at what the most successful franchisees in any given system are doing.”
The size of franchises often means that a franchisee can benefit from significant economies of scale, something an independent business does not have. The nature of franchising allows for more risk-taking too, since some of the risk is held by the franchisor, unlike independent business owners who take on 100 per cent of the risk when starting a business.
Franchising also gives lesser-represented minority groups a better chance at business ownership. The 2016 Annual Survey of Entrepreneurs also suggests that franchise establishments are more likely to have an owner of colour than non-franchises and that can be seen across the entire franchise industry, not just in a few isolated sectors.
“We have long-standing data prior to this report. that there’s a higher percentage of people of color owning a franchise, higher percentage of women owning a franchise,” said Layman.
“26 per cent of franchises are owned by people of color, compared with 17 per cent of independent businesses.”
Read the full article written by Raghav Patel of GlobalFranchise
If you’re interested in learning more about start-ups vs entrepreneurs check out our article here > https://franchising.kareplus.co.uk/news/start-ups-vs-franchising-which-path-is-more-proven/
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