Business Franchise

Economists say that there are 4 main sources to get personal income. They are:
-income from work or salary and wages;
-income from providing services (like private dentists, lawyers, brokers and so on);
-income from business;
-income from wealth or investment.
Each of these variants has advantages and disadvantages at the same time. But many financial consultants agree that a person can get much more money from business and investment. As I think that’s the main reason why many people decide to start their own business without any preliminary education or experience. And the same reason pushes them to buy a franchise license as they often hear and read that it’s the easiest way to start-up.
At the same time prospective entrepreneurs checking franchise opportunities will easily meet the statistics which shows that franchisees seem to operate much better in comparison to stand-alone small businesses. So, I studied this question a bit and decided to write a few words.  It seems to me that there could be some hidden reefs while interpreting the numbers on average franchise activity.
The main reef is the way of collecting the information. In most cases it is a survey! Not tax or bank information but just survey! This means that there is the group that the survey is trying to identify, and the franchises that have left the business or resold it are excluded from the survey because it’s almost impossible to reach them…
Just think about this. Franchise Associations are sending questionnaires only to existing franchisees. And as they still exist it means that they operate successfully. And vice versa… those who lost their business and their money are excluded from the survey. So, the results of such survey are better than real figures. And only the franchisees who became bankrupt but couldn’t get rid of their franchises will worsen the picture.
So, thinking about buying the franchise it’s necessary to remember that when you start you business it’s only your decision. Nobody has an incentive to brighten up your future. But the franchisor gets money directly from you, it’s his business. So, he has an incentive to promote his franchise…

This entry was posted on Wednesday, May 10th, 2006 at 7:05 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.