Franchise Failure Rates: Understanding What Factors Determine a Franchise’s Failure or Success

If you've been curious about jumping into the world of franchising, you might be worried about the risk involved. To get some insight, here’s a breakdown of what drives the failure rate of franchises, according to data from the Franchise Brokers Association. 

The Complex World of Franchise Failures

First of all, there's no one-size-fits-all answer to the question of what causes a franchise to fail. Unlike starting your own business from scratch, investing in a franchise involves a number of moving parts. And these moving parts can make it tough to nail down an exact failure rate.

Depending on who you ask, you might hear numbers ranging from a whopping 50% flop rate to a more modest 20%. So, what gives?

The Factors That Call the Shots

When it comes to franchising, not all opportunities are created equal. Here are a few factors that might influence the success rate. 

Your Experience: There’s no doubt that having some prior experience in the business world is handy in franchising. But even if you're a newbie, many franchisors offer training and support to get you up to speed. What really matters is your commitment, your ability to roll with the punches, and your knack for connecting with customers.

Franchisor Support: The support a franchisee receives from a franchisor can make a world of difference. This includes training, marketing assistance, and a team to answer all your questions. Picking a franchise with solid support can be a game-changer.

Selected Industry: Not all industries weather economic storms the same way. Some, like food and home services, tend to ride out tough times better. Others, like retail and travel, might hit rough patches depending on what’s going on in the world. Knowing what's what in your chosen industry is key.

Brand: Though it's not a guarantee for success, sometimes having a recognizable brand backing you up can help. People trust what they know, so joining a well-established franchise can give you a leg up. A good reputation can also make marketing easier.

Market: Understanding local demand, competition and who your customers are can also make or break your franchise. It’s important to be in tune with your market and decide whether your business can thrive in it. 

Thriving (or Surviving) in Tough Times

Franchising can be pretty resilient — even when the economy takes a hit. In fact, it can even work in the industry’s favor.

In an interview with Yahoo! Finance, 1851 Publisher Nick Powills noted that “the franchise industry tends to work opposite that of the economy. So when the economy goes down, franchising goes up.” 

And when the going gets tough, franchisors often step up their support game to help franchisees survive (and hopefully thrive) their challenging times.

Franchising vs. Going Solo

It’s clear that franchising has its perks, such as built-in support and a ready-made business model. But going it alone has its advantages too, like more freedom to do your own thing. As the person behind the business, success is ultimately defined and determined by you. 

The Bottom Line on Franchise Failure Rates

The takeaway? Franchise failure rates are a mixed bag, influenced by many factors. But with research, determination and the right brand, a successful venture awaits. 

Every great franchisee had help buying a franchise. Want to learn more about how 1851 helps franchisees find the right franchise opportunity? Visit www.1851growthclub.com and start your journey.