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Should You Buy a Franchise?
By Jim Monahan

Buying a franchise has always been a part of the American Dream of owning your own business. With the proliferation of franchising, you now have a choice between starting your own independent business or operating your own business unit as part of a franchise system. This choice will usually hinge upon the type of business that interests you, matches your personality, finances, and your risk tolerance.

First, let s examine some general franchise statistics. It is estimated that there are more than 550,000 franchise businesses in the U.S. today generating more than $800 billion in annual sales. Precise success rates for independent businesses versus franchised ones are not widely available, but most business experts believe that franchised businesses have a better chance of success than independently-owned small businesses.

The numbers published by the Department of Commerce and the U.S. Small Business Administration come the closest to offering a valid comparison. The Department of Commerce reported that, since 1971, less than 5% of franchised businesses have failed or been discontinued each year. On the other hand, the SBA reports that 65% of business start-ups fail within five years.

When it comes to making a decision between opening an independent business or buying into a franchise system, the statistics can tell you only so much. To make the right decision, you ll have to take stock of your personality, working style, access to financing and risk tolerance.

Interestingly enough, the majority of both franchises and independent business people share one quality. They value independence over security. Where they differ the most is in their risk tolerance and the tolerance for bureaucracy. The true entrepreneur will be willing to live with risk if the projected payoff is sufficient and will have a very low tolerance for controls and procedures.

The “ideal franchisee” is somewhat risk-averse and is willing to pay the price in terms of the franchise fee and royalties to diminish the overall risk of failure. This franchisee will also faithfully follow controls and procedures. After all, the system is part of the purchase price, and strict adherence to its tenets promises success.

The entrepreneur - the type most likely to succeed as an independent businessperson - will sometimes find her or his application rejected by the franchisor. Since conformity to the franchisor s format and operating procedures are critical for success, the franchisor will reject anyone who seems to show resistance to standard operating procedures. Franchisors also believe that entrepreneurs may be openly critical of things they don t like, may lose interest in the routine tasks of running the franchise, and may quickly start to look for the next challenge.

Check out the leading franchise search engine on the Internet at http://www.franchisessearcher.com/

Jim Monahan put over 20 years of business and franchise experience into the leading Franchise search engine on the Internet. It s a powerful search engine dedicated exclusively to individuals interested in information about franchises and business opportunities. Check out the leading franchise search engine on the Internet at http://www.franchisessearcher.com/

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