What is the current rate of success for start-up franchisees?

The NatWest/British Franchise Association Franchise Survey 2011 states that: ‘Loss making continues to account for only one in 10 franchisees. However, among newer franchisees it’s clear that a substantial proportion is having a tough time (28 per cent). In 2009 this proportion was 14 per cent, in 2008 19 per cent and in 2007 12 per cent. We might hypothesise that some of the assumptions made by franchisees going into business within the last couple of years will have been severely challenged by the realities of starting to trade in a tough market.’

It is not unusual for any business start-up to make losses in its first couple of years, at least in terms of recouping the initial investment, even if an operating profit is being made, so these figures should not be overly concerning. The good news is that the same survey tells us that of the franchisees who have been trading more than five years, 48 per cent claim to be highly or quite profitable, 46 per cent claim to be marginally profitable and only five per cent claim to be loss making. Furthermore, commercial failure accounts for just 3.1 per cent of franchisee closures every year - far lower than the figure for independent businesses.The problem with all of this is that it depends how the franchisees’ accounts are prepared and how the survey data is ‘spun’, but the received wisdom remains that franchising works if you take a long-term approach and are not looking to get rich quick.