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When most people think of a franchise business, fast food comes to mind. Franchising, however, long ago grew beyond the burger and fried-chicken shops dotting America's landscape.
Today franchise concepts span over 75 different product and service sectors. The franchising business model has turned into a major economic engine, one that's providing increasing opportunity for individual entrepreneurs. And there are over 6,500 franchise opportunities available today. How do you find the right one for you that is also a good growth investment. It is truly like looking for a good needle in a haystack!
It wasn't too long ago that a slew of dubious get-rich-quick schemes sullied franchising reputation. But in recent years, with federal regulation through the Federal Trade Commission and the oversight of industry trade organizations like the International Franchise Association (IFA), franchising has become the pre-eminent way of starting and growing a successful business.
Indeed, according to the IFA, some 760,000 franchise businesses generate jobs for more than 18 million people, or 14% of the nation's private-sector workforce. That represents $1.53 trillion in economic activity, or 9.5% of the private sector's total output. Franchising as the preferred method of business establishment is growing 6 to 10% a year.
Although the concept has a long history, franchising really took off in the 1950s when companies like McDonald's and Holiday Inn started sprouting up across the country. Back then, an estimated 100 franchise systems existed. Today, they number roughly 6,500.
With a track record of profitability, broad geographical appeal, relatively low initial capital investments, and easily replicated models, franchising has become more attractive -- for both companies looking to expand and individuals looking to run their own businesses but lacking prior self-employment experience.
Reflecting America's transition to a service economy, the proliferation of two-income families, and the continuing change in the nation's demographics, franchising is shifting from traditional concepts like food to more service-oriented businesses. Concepts such as mobile dry-cleaning, franchise concierge service that runs all manner of errands from plant watering to grocery shopping, have emerged in response to busy consumers who need to simplify their daily lives.
WANT STATISTICS? Consider these from the Department of Commerce:
Franchise businesses account for over 42% of all retail sales in the United States.
Franchise businesses employ more than 8.5 million Americans.
A 1999 study by The United States Chamber of Commerce found that 86% of franchises opened within the last five years were still under the same ownership and 97% of them were still open for business.
A U.S. Department of Commerce study conducted from 1971 to 1997 showed that during that time less than 5% franchise businesses were closed each year. Compare that to a U.S. Small Business Administration study conducted from 1978 to 1998, which found that 62% of non franchised businesses closed within the first 6 years of their existence.
Total sales by franchised businesses are projected to reach $1 trillion, this year.
1 out of every 12 business is a franchised business.
A new franchised business is opened every 8 minutes of every business day.
In a 2000 study, the median gross annual income of franchisees was in the $75,000 to $124,000 range, with over 30% of franchisees earning over $150,000 per year.
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