Franchise System Success – More Elusive Than You Think

Posted on 10. Feb, 2010 by in Franchising, Management Philosophy

Most businesses seeking to franchise a concept do so with the belief that it is a proven way to expand their company successfully. However, its not nearly as easy as many statistics might lead you to believe. A handful of brands comprise the clear majority of successful franchises and thousands of smaller franchise systems experience a very different life cycle when compared to their few larger counterparts.

For example, a study focusing on franchisor success rates, over a twelve year period, was published in 1998 by Francine LaFontaine and Kathryn Shaw. The findings concluded that only 28.6% of franchisors were still in business after a 12 year period. During their study period 1,941 of the 2,524 companies that began franchising quit franchising: a nearly 77% attrition rate. These findings are largely counter to the main stream statistics promoted by the franchise industry.

A recent White Paper entitled, “Franchising: Disparity in Numbers” written by my colleague Clint Lee of the Flywheel Group (you can obtain a copy here) shows detailed research on the reality of franchising today. The key point is that success in franchising is obtained like it is in most industries: a combination of competent people, a sound and proven business model, and continuous process improvements. Interestingly, these often aren’t the most emphasized disciplines you would hear among many “experts”. Visit the Flywheel Group and learn more about our Franchise Flywheel philosophy. There is an answer to quality franchise system management and it isn’t what most “experts” would tell you.

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