A Startling Franchise Industry Statistic

During the process of gathering some franchise industry data I discovered an interesting statistic. Read more to learn out what I found.

In a recent article, I wrote about a lack of specific franchise industry data available to the general public or industry. As a follow up to that piece I decided to take an in-depth look at a related category of information that has intrigued me for a number of years. Although I’ve just started to do some work on this subject I thought that I’d provide a preview. I welcome comments and information anyone would like to provide.

After reviewing approximately 1,400 franchise listings in The Franchise Handbook I found that 1 in 6 or 256 listed franchises had 5 franchisees or less. The Franchise Handbook receives regular franchisor updates from their emails, advertising solicitations and their update listings twice a year. However, not everyone responds so the number is a close approximation. Within this category there are a number of franchisors that started franchising over 10 years ago.

A number of these franchisors may have a flawed franchise and shouldn’t have launched a franchise program. Did some consultant convince them otherwise? However, it’s my opinion that there are a number of interesting and attractive franchise concepts that fail to grow because of other reasons including:

• A lack of working capital necessary to fund new franchise development
• The franchisor may not have the required business, franchise or leadership skills needed to successfully launch and sustain a franchise program
• A franchisor may simply decide to rein in their franchise program and focus on their corporate location(s).
• Personal reasons

My next step will be to identify why so many franchisors failed to develop their program, which will be a daunting challenge.