What is franchising?
Franchising is a business concept where a franchisee is contractually permitted to use the franchisor’s ideas and business model. The franchise industry in the United States allows independent entrepreneurs to use the rights to a larger company’s business name, logo, and products to operate an individual location. The franchiser is the owner of the larger company who sells the rights to license their business, and the franchisee is the third-party owner and operator of the business locations. Franchisees are separate businesses. These smaller businesses work under the rules as established by the franchisor and agreed to by the franchise owner, also called a franchisee.
Franchises are available through different types of establishments. However, the franchise industry is most commonly known for its fast-food sector. 30 percent of those interested in opening a franchise in the United States indicated that they are most interested in opening a quick-service fast-food franchise.
The franchising industry in the United States includes arrangements where a company licenses the use of their brand, products, and processes to a separate business, which then operates under the name of the larger company. This practice is common in a variety of segments across the U.S. economy and encompasses some of the most well-known companies in the world. In 2018, it is estimated that there will be some 759,200 franchise establishments in the United States, outputting some 760 billion U.S. dollars and employing over eight million people. The largest segment of the franchising industry is quick-service restaurants, comprising over 250 billion dollars of the industry’s total economic output, followed by business services with around 100 billion dollars. Rounding out the top five are franchises in full-service restaurants, real estate, and commercial and residential services.
What percentage of small businesses are franchises?
Overall, 2.9% of firms are franchises. More specifically, 2.3% of nonemployer firms are franchises, as are 5.3% of small employers and 9.6% of large employers. About one in five firms (19.3%) are family-owned. See the SBE Council Organization.
How big is the franchising industry in the U.S.?
In 2019, the economic output of franchise establishments in the United States was about 787.5 billion U.S. dollars. Contributing to the economic output of franchise establishments in the United States, were about 8.43 million people who worked for a franchise business.
How many franchise establishments are there in the US?
In 2019, there were 773,603, and in 2020 (during the pandemic) the number increased to 785,316 franchise establishments in the United States. The number of franchise establishments in the US has steadily risen since 2013, according to Statista Research.
Leading U.S.-based franchises
The most famous yet most lucrative U.S.-based franchise is McDonald’s, bringing in over 96 billion U.S. dollars in sales. Following McDonald’s was 7-Eleven, collecting 86 billion U.S. dollars in sales. In 2018, McDonald’s generated 11 billion U.S. dollars in revenue from its franchised restaurants. The first step in contributing to McDonald’s economic franchise success is the startup cost.
Initial Investment
Your earnings potential as a franchise owner depends largely on the brand and industry. Franchise owners in the restaurant industry earn an average of $82,000 per year, which is pretty solid considering the salary range of a non-franchise restaurant owner can range from $24,000 to $155,000.
How big is the franchise industry in the US?
Franchising, employing an estimated 8.4 million people, represents 2.8 percent of all nonfarm business establishments in the United States. Franchised businesses directly provided more than 9.1 million jobs, met a $304 billion payroll, produced $802 billion of output, and added over $468 billion of gross domestic product (“GDP”). FRANdata and the International Franchise Association (IFA) created this report as a forecast for the franchise industry of the US economy in 2020.
What is the success rate of franchises?
A Google search may lead to an evenly balanced sermon on the pros and cons of franchise ownership. Or you may land on this gem from About.com: "Some studies show that franchises have a success rate of approximately 90 percent as compared to only about 15 percent for businesses that are started from the ground up."
Is the success rate better for franchises?
According to 2019 research based on official census data, the
two-year franchise success rate is about 8% higher than the independent business success rate. The one-year survival rate for franchises is about 6.3% higher (Francine Lafontaine, Journal of Economics & Management Strategy). Most franchise owners are men.
Learn more.
Opening a franchise might just be the right path for you. Franchising allows bigger businesses to branch out and grow while giving people the opportunity to run their own business with the help and support of a larger company that has a proven formula for success.
Franchises offer franchisees a strategic identity that is not only effective but also has a great market impact. Hence, corporate brand identities have proven to be successful in the marketplace. ... With an established brand, comes recognition assuring the customer's experience and products in the different location.
Is it hard to open a franchise?
Whereas starting a business often comes with a lot of unknowns, a franchise is proof of a successful model already in motion. Running your own franchise is still hard work, and there are drawbacks to opening a business that requires operating by someone else's rules.
What is the fee to become a franchise?
Franchise fees typically begin with an initial payment that the franchise makes to the franchisor when they sign their franchise agreement and become a franchise. This fee can be any amount above $500 (per the FTC Rule) and is generally in the
range of $20,000 to $50,000. For more information about franchise fees,
click here.
Why do franchises fail?
The truth is that hundreds of franchisees fail each year. The most frequent causes:
lack of funds, poor people skills, reluctance to follow the formula, a mismatch between franchisee and the business, and -- perhaps surprisingly -- an inept franchiser.
Click here for more information.
Can owning a franchise make you rich?
The bottom line is that while
a franchise can make you independently wealthy, it isn't a guarantee. Choosing the right business in the right industry, and going in with preexisting entrepreneurial experience and/or existing wealth can help, but your income-generating potential may still be somewhat limited.
Click here to read the article.
Are franchises a good investment?
Prospective business owners, who are looking for sound investments often ask, “Are franchises a good investment?” The short answer is yes—if you find the right opportunity for you. ... Research suggests that franchise businesses overall have a startup success rate of greater than 90% and better longevity.
Can you open a franchise with no experience?
Do you need previous experience owning a business to start a non-franchise business? No. ... You can learn skills useful in starting a business, such as financial and relationship management, in a variety of ways. Additionally, your franchisor will provide you with the necessary business management training.
Is it hard to run a franchise?
Whereas starting a business often comes with a lot of unknowns, a franchise is proof of a successful model already in motion. ...
Running your own franchise is still hard work, and there are drawbacks to opening a business that requires operating by someone else's rules. See
The Pros And Cons Of Buying A Franchise - Forbes.
How do franchise owners (franchisors) make money?
A franchisor makes money from royalties and fees paid by the franchise owners. A franchise owner makes money
through profits received from sales and service transactions. This is generally the leftover amount of money received from revenue after overhead costs are taken out. Learn more
here.
Do franchise owners have to work?
There are a variety of places a
franchise owner can work, depending on the type of franchise they own. ... Some franchise owners choose to take an active role, and will work alongside their employees, while at the same time managing the business.
Click here for the article.
Can a franchise owner (franchisee) be fired?
You go into business thinking you are the boss, so you can't get fired. The franchisor, however, has the power to terminate or not to renew your contract.
You can essentially be fired, your franchise taken away, resulting in you holding the metaphorical bag. ... A franchisee neglects or abandons the franchise. Read more
here.
How many hours do franchise owners work?
Some franchisees find that they're working 80 hours a week while they get their businesses up and running. One owner told us, “I stick with half days — 12 hours.” Few find that they're doing only 40 hours a week. The payoff comes a few years later when they can relax and enjoy the fruits of their labor.
Is it cheaper to buy a franchise or start your own business?
What are the advantages of buying a franchise?
As mentioned above, you don't necessarily need business experience to run a franchise. Franchisors usually provide the training you need to operate their business model. Also as mentioned,
franchises have a higher rate of success than start-up businesses. Plus, you may find it easier to secure finance for a franchise. Make sure the franchise you decide upon is registered and approved by the SBA and is in their directory. Check
here.
How many people work in small businesses?
Small businesses employ 60.6 million people, which makes 47.1 percent of the U.S. private workforce, on a percentage basis. Jul 9, 2021
How many people want to own their own business?
Three in five (62 percent) Americans want to make their dream of owning a business a reality, according to new research. The study explores the ambitions and perceptions that 1,000 American non-business owners have around becoming their own boss and the reality experienced by 500 existing small business owners.
How many people start their own business each year?
Over 627,000 new businesses open each year, according to SBA estimates.
Is 2021 a good time to start a business?
Entrepreneurs tend to start businesses when the economy is buoyant and flourishing, and few will consider 2021 the year to launch a business as the world is just picking itself up after a pandemic that impacted most economies negatively. For entrepreneurs, having fewer competitors means one less thing to worry about.
What percentage of the economy is small business in 2021?
What is the most popular profession for entrepreneurs?
Top jobs for entrepreneurs
- Appraiser. ...
- Financial advisor. ...
- Marketing manager. ...
- Web developer. ...
- Sales manager. ...
- Systems analyst. National average salary: $80,941 per year. ...
- Construction manager. National average salary: $81,787 per year. ...
- Management analyst. National average salary: $82,854 per year.
More items... Published Feb 22, 2021. See 10 Jobs for an Entrepreneur | Indeed.com.
Why do people start their own businesses?
Because business ownership provides them with a sense of stability for their futures and the futures of their families, and they create businesses to help secure their retirements or legacies to their children. They take tremendous pride in the businesses they have created and are in it for the long haul.
Why did millions of people start a business during the pandemic?
During the pandemic, entrepreneurs opened their own businesses at more than twice the rate seen in pre-pandemic times, thanks to government support programs and improved remote technology that weren't available during other economic downturns such as the Great Recession. Published
Sep 14, 2021. See
https://www.nbcnews.com/news/amp/ncna1279063.
73 Remarkable Small Business Statistics to Know
What are the demographics of small business owners?
47.2% of all business owners are women, while only 49.2% are men. The average age of an employed business owner is 44 years old. The most common ethnicity of business owners is White (72.6%), followed by Hispanic or Latino (13.0%) and Asian (6.1%). Sep 9, 2021 - See Business Owner Demographics and Statistics In The US - Zippia.
Who is considered a small business owner?
Identifying Small-Scale Business Owners in the United States: To be a small-scale business owner, you
must own a business with fewer than 500 employees and less than $7 million in annual revenues. See
What Is a Small-Scale Business Owner?
What is the average age of small business owners?
50.3 years old
How many small businesses started in 2020?
According to the Census Bureau, more than 4.4 million new businesses were created in the U.S. during 2020 — the highest total on record. For reference, that's a 24.3% increase from 2019 and 51.0% higher than the 2010-19 average. Half a million new businesses were started in January 2021, alone. Published Jun 29, 2021. See Entrepreneurs Started Businesses in Record Numbers During the Pandemic.
