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Q.

What is the success rate of franchises in the UK?

Author: John Pratt

answered by John Pratt

Senior Partner at Hamilton Pratt

The short answer is much higher than comparable nonfranchised start-up businesses. The reason for this is that the whole point of franchising is the franchisor has a proven system that works and, providing you follow that system, you will succeed.  Anecdotally, it has always been said that 80 per cent of new businesses fail within five years and 80 per cent of new franchise businesses succeed in the same period.  Evidence for the high success rate of franchising is provided by the annual British Franchise Association/NatWest franchise surveys. In the latest survey published in 2007, it was found that 93 per cent of franchisees reported that they were profitable in 2006.  The survey did, however, add a word of caution to the overall positive headline figure, and that is that there was a decline in the number of units that were highly profitable from 10 per cent to six per cent and an increase in those that were marginally profitable to 48 per cent from 43 per cent.  Nevertheless, the proportion making an outright loss has remained largely static for the last 10 years at around seven per cent.

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