Is buying a franchise a safer investment than starting my own business?
Great question! And the answer is… it depends. I know that sounds like a cop-out but it really boils down to two key variables: 1.) Which franchise are you thinking about buying, and 2.) You.
First, every franchise system has a different “success” rate. If you measure business success purely by whether or not a franchisee failed and closed up shop, that is easy to determine by looking at the franchise company’s FDD (Franchise Disclosure Document). Every franchise company has an FDD, and they are required by law to give you one before you purchase a franchise. Item #20 of any FDD will list any franchise units that were transferred, terminated, reacquired, left the system or otherwise. The FDD will also list the names of all current franchisees, as well as any franchise owners that transferred, did not renew or were terminated.
Obviously, any system with a lot of turnover should be a big red flag for anyone considering buying a franchise. That said, even with little or no turnover, a system can still have a lot of unhappy and unsuccessful franchise owners. This is why taking a good hard look at franchisee satisfaction is so important. For a list of franchise systems with extremely high franchisee satisfaction, visit www.fbr50.com
The second factor is you. Are you a good fit to be a franchisee? Will you work hard and follow the system the franchisor will provide? Are you passionate about the business that you are considering? Is your family on board with your decision? Do you have enough capital to survive until your business starts generating some income? Do you have the inner drive required to be a successful business owner? All these factors will contribute to your ultimate success in business – whether you buy a franchise or start a new business from scratch.
Good luck with your decision!