How Successful is Franchising?
Franchisors have typically used “success” rate statistics to promote the sale of franchises. Frequently, franchisors do not report data on failed or terminated franchises, if the franchise (i.e., the unit itself as opposed to the franchisee who owned the unit) remains in business.
Under this definition of “success,” a successful franchise unit conceivably could have multiple franchisees who have failed and gone bankrupt.
In each instance, the franchisor intervenes and places the failed franchise in the hands of a new franchisee. As long as the franchise survives, it is considered “successful.” This is the equivalent of saying that a cruise liner’s voyages are “successful” even though passengers are falling overboard on the high seas, since they are replaced with new passengers at subsequent ports of call. As long as the ship does not sink, the voyages are “successful.”
This self-serving definition of success has led to exaggerated claims (usually 90 percent plus) of “success” for franchising. Recent studies suggest, however, that independent businesses have as good, if not better, chances of succeeding than do franchises.
For more information, read this article (it is in PDF format): Looking Deep into Transfer Cases (Franchise Times)