Some people get bitten by the entrepreneurial bug, but some do not and are happy to work for someone else for a living. For those who are interested in going into business for themselves they have many decisions to make at the beginning of that process. One big decision is whether they want to build their business from the ground up (aka a non-franchise business) or buy into a branded business (aka a franchise business).
Like with everything else, there are pros and cons for each option here. Franchise businesses typically have a higher growth rate and more stability, but there is less freedom and control in how the franchisee runs the business. The opposite is true of non-franchise businesses, whereby they are more risky (typically a lower growth rate) but they give the business owner more freedom and control in how the business runs. Another big factor, and the topic of this article, is the success rates between the two types of businesses. Typically the success rates for franchise businesses are higher than non-franchise businesses. Below we will look in more detail at what the specific numbers are and why the rates of success differ for each type of business.
There are many franchise business opportunities available, in the United States and worldwide, for such popular brands as Firehouse Subs, Planet Fitness, and Massage Envy Spa. The thought of coming up with a completely new business idea or a business idea that will have enough differentiating characteristics to make it viable can be daunting. By this point in human history, are there even any new ideas left? For entrepreneurs who prefer to fast-track through this part, the thought of buying into a franchise is very appealing. Odds are the business is going to make money because it’s already been making money and having success, right?
You would not have heard about it otherwise, and any franchises where you heard they are losing money instead of making money, obviously you would stay away from those in the first place. Franchise businesses already have vital processes, training, financing, and other resources available that entrepreneurs do not need to develop on their own (which requires hard to quantify amounts of time and money). All of this leads to the success rates for franchise businesses to be as high as 90-95%, though that figure is debatable, so it should be considered on the high end of a possibility spectrum.
Non-franchise businesses offer entrepreneurs total control over their business, so they do not have to worry about a never-ending power struggle with a franchiser. With risk comes reward, so non- franchise business also mean that the owner has the potential for greater earnings due to not having to give a percentage back to the franchiser. If an entrepreneur has a truly unique business idea, there may not even be any franchise opportunities for the industry they are looking to get into. Because of the extra time and money it typically takes to make such businesses viable and create all the necessary processes, there is an increased margin for error (and failure). That means that the success rates of non-franchise businesses are typically around 72% after 4 years.