The Power of Franchising in America- By the Numbers

FM number-of-franchise-businesses CensusThe importance of the American Franchise system cannot be overemphasized. Since the 1840s, when German brewers granted rights to taverns to craft their beer, the system made its way across the pond to gradually become the major force in American business that it is today.

 

Franchise Facts

  • There are 825,000 U.S. franchise businesses
  • 40.9 percent  of all retail businesses are franchises
  • Franchising generated 8.2 million direct franchise jobs and 18 million indirect
  • The business model contributes $2.1 trillion to the U.S. Gross National Product [GDP] annually

Franchise Ownership

Isaac Singer, who improved the sewing machine in the mid-1800s, is considered one of the first, if not the first, American franchisor. Now, the business models attract every type of individual seeking his/her slice of the enticing American Dream of business ownership. In franchising’s case, this is a tried and true business formula.

Current franchise ownership stats are:

  • 20.5 percent  are owned by women
  • 24.4 percent  are jointly owned by women
  • Since 2011, more than 5,000 US veterans and their spouses have started franchises
  • Minority ownership increased by 6.2% from 2002 – 2007
  • 20.5 percent of franchises are minority owned. (Minorities make up 14.2% ownership of non-franchise businesses.)

Franchise Progress

There is a reason that franchising remains so popular among such a diverse segment of entrepreneurs. The formula is successful. Because, let’s face it, it’s tough to make a go of a business. With a franchise, however, you are in business for yourself but not by yourself. And that’s what creates the dynamics in these statistics.

  • Fewer than 5% of total franchises close each year
  • Nearly 97% of new franchises are still in business after 5 years (study done by Arthur Anderson/now Accenture on a sample of 400)
  • 62.2 percent of all new businesses close after 6 years (U.S. Small Business Administration)

When considering a business opportunity, make sure you look at the power of a franchise. If you join one, you will be part of one of America’s great economic engines.

(graph from census.gov)

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