Want Your Business to be a Success? Buy a Franchise

There is no doubt the recession and its aftermath have continued to play a major role in the economic hardships that plague the United States. The unemployment rate is still high, most consumers are still too frightened to spend and while the end seems to be in sight, there is still a distance to travel to get there.

But as bad as things have been, things could have been a lot worse if not for the strong franchising segment in the country.

We’ve known that opening a franchise is a great way to improve the odds that your business venture will succeed, but to understand the major role franchising plays in the American economy, we have to look a bit deeper at the numbers.

According to The Economic Impact of Franchised Businesses, Volume III, which was prepared by PricewaterhouseCoopers for the IFA Educational Foundation, the most prolific type of franchise, the business format franchise generated $654.2 billion in output and $378.8 billion of the Gross Domestic Product, or nearly 20% of the United States’ overall GDP.

At the same time, the distribution franchise, a different franchise model, generated $148 billion in output and $89.6 billion to the GDP. When the two categories are combined, nearly a quarter of the United States’ GDP is produced by franchises.

These numbers tell us some important things about the strength of the franchising industry today.
While small businesses all over the country need help to stay relevant (and in business), franchises remain the best bet, for both entrepreneurs who want to start their own business and for the country as a whole to dig out of the economic malaise we’ve endured for years.

These numbers reinforce something that most of us in franchising already knew. Namely, that opening a franchised shop is a safer and generally more effective way of generating wealth.

Being part of a franchise means you have resources to help you, systems that spell out what you can and can’t do and a blueprint for profits that has been proven to work.

So if you want to own your own business, it may be time to find a franchise model that suits you and look into that system before starting up on your own.


2 Comments

  • By Steven, April 17, 2012 @ 11:10 am

    Hi jodie, I’m wondering if you can tell me if buying a franchise still allows you to build a saleable asset, whcih is partly what being in business is all about. Or are you just building the franchisor’s business further and further? Know what I mean. Hope you can respond. thanks.

  • By Jodie Shaw, June 6, 2012 @ 11:09 pm

    First off, let’s define what a franchise is and what you’re “buying” when you become a franchisee.

    Whenever you buy into a franchise system, you’re buying a contract that gives you the right to use a brand identity, as well as that brand’s proprietary systems, intellectual property and everything else you need to properly run a branded company.

    The franchise contract is structured for a specific period of time, and requires the franchisee to follow specific guidelines in terms of operations, as well as financial and service performance.

    So, when it comes to buying into or selling out of a franchise system, the transaction involves the buying or selling of the franchise contract.

    In most cases, if you do want to sell a franchise contract as a franchisee, you typically can’t sell the contract to just any buyer.

    The franchisor would have the right to approve the buyer based on specific criteria, and the buyer would have to go through the franchisor’s training system, and run the franchise according to the franchise system.

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