If you’re thinking about franchise ownership as a way to make a better life for yourself, you’ve likely been researching franchise success statistics. What makes a franchise successful? What percentage of franchises fail? These are questions we discuss with potential franchisees at Home Franchise Concepts, and we have some insight to share with you when researching franchise ownership.
The Franchise Forecast
One of the most important franchising statistics is that franchising is a steady field of business that has weathered many economic downturns and upturns. In the past 15 years, there have been more than 700,000 franchise establishments in the U.S., except for 2013 when there were 697,943. Those numbers have remained very stable and are growing. The projection for 2023 is that the number of franchise establishments in the U.S. will surpass 800,000.
Interest in franchising has been spurred by a national interest in business ownership. Census Bureau statistics show explosive growth in business formation applications in the past decade, starting with 2.575 million in 2012 to 5.033 million in 2022. The number of people pursuing a business has more than doubled in 10 years, so you’re in good company with millions of other Americans who are also seeking to own a business.
Understanding Franchising Statistics
You’re excited to become a business owner and you’re looking to land in the right industry. This is where you can run into an overwhelming number of franchise industry statistics. Here’s the truth: There is no magic industry with guaranteed franchise success.
At Home Franchise Concepts, we manage 10 franchise brands, all connected to the home services industry. We have thousands of franchisees in our network. An article in Entrepreneur listed 10 traits of the most successful franchise owners, and there are many similarities to our franchisees. Here’s a quick overview of the 10 traits:
- Passionate about their franchise’s concept
- Patient while the business gets established
- Resilient enough to weather the ups and downs of running a business
- Collaborative for enhanced success
- Involved in their community
- Consistent in following the franchise system
- Hardworking, having hustle and initiative
- Focused on expansion
- Good soft skills
Instead of looking at franchise success rates and franchise failure rates as an indication of whether franchising is right for you, look instead at what you want from franchise ownership and then find the brands that most align with your thinking. Once you have a short list, you can get franchising statistics pertinent to that franchise from the franchise disclosure document (FDD).
Item 20 of the FDD
All U.S. franchises must adhere to the federal Franchise Rule, which requires franchisors to disclose certain information about their business through the FDD. Item 20 of the FDD includes data about the number of outlets for the three most recent fiscal years, contained in five tables:
- Table 1: A Summary of Outlets. This includes outlet type (company-owned, franchised, and total), outlets at the start and end of the year, and net change.
- Table 2: Transfers. Information about transfers of outlets over the last three fiscal years. A transfer happens when the controlling interest in the franchise is transferred to someone other than the current owner.
- Table 3: Status Change – Franchised Outlets. Changes in the status of franchised outlets over the last three fiscal years. This can include terminations, non-renewals, those reacquired by the franchisor, and those that ceased operations for other reasons.
- Table 4: Status Change – Company-Owned Outlets. Changes in the status of company-owned outlets during the last three fiscal years.
- Table 5: Projections. Projected new outlet openings in the next fiscal year and the total number of franchise agreements signed by new franchisees but whose outlets remain unopened.
This is your most accurate information about a franchise because it gives you an idea of whether the franchise is holding its own, growing, or declining. Knowing that a certain industry is doing well is one thing; knowing that a certain franchise within that industry is doing well is quite another.
Start Your Research with Home Franchise Concepts
The success of franchises is a combination of the franchise opportunity and the owner’s commitment to the business. That collaborative relationship is a strength of Home Franchise Concepts and the 10 brands we are proud to promote: Budget Blinds®, The Tailored Closet®, PremierGarage®, Concrete Craft®, AdvantaClean®, Lightspeed Restoration®, Kitchen Tune-Up®, Bath Tune-Up®, Two Maids®, and Aussie Pet Mobile®.
See what solid brand investment in a healthy industry looks like in a business. Contact us to start the conversation.