Franchise - If you are considering buying a franchise and wish to own your own business, as a franchisee then you need to carefully study the various franchisors and their offerings to make sure it is a good fit and that the companies are financially stable. Perhaps you didn't know this but franchisors have a high rate of failure and most go out of business before five years. In fact it's even worse than that the failure rate of small businesses in the US, as franchisors rates of failure are pushing 5 to 1 in the first five years.
The failure rate of franchising companies is triple that of franchisee failures. One thing that I advise franchise buyers to check out is to see if the franchisor has maintained steady growth. Most likely what you'll find is that the franchisor goes through spurts of growth based on a market conditions and the business cycles. If you do a little bit of research you will also find that the franchisor can go through wild swings in available capital, and on their income statement.
A franchising company that grows real fast can often become cash poor and that means the level of support for his franchisees goes down to a trickle, which is something you definitely don't want to know in advance if you are going to be one of the franchise team members. So before you buy make sure that the company maintains steady growth, and in times of rapid growth did they give proper support or franchised outlets, and keep up with their cash flow.
There are two ways to get to the bottom of this question. One is to look at the financial statements for several years back and contrast that to the number of outlets and growth. The second way to figure this out is to talk to franchisees that are currently in the system about the level of support to see if it has been steady. Please consider all this. <>
By Lance Winslow
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