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BUYING A SMALL BUSINESS

Should You Consider Franchising?

A new report from the U.S. Census Bureau shows one in ten businesses is a franchise.

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Franchises including Cold Stone Creamery employ 7.9 million workers in the U.S.

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More than one in every 10 U.S. businesses is a franchise – and the outlets dominate a handful of industries, according to the U.S. Census Bureau.

For the first time, the agency recorded and analyzed statistics on franchise businesses in its 2007 economic census. Previous economic censuses, conducted every five years, have included a question on franchising only for two industries: fast-food and full-service restaurants. The bureau received responses from 453,326 franchises, or 10.5 percent of the 4.3 million companies surveyed in 2007.

The Economic Census Franchise Report – released last week – found three industries where franchises make up the vast majority of businesses: they make up 100 percent of new car dealers, 75 percent of fast-food restaurants, and 63 percent of diet and weight-loss centers. (New car dealers also were the top franchises for sales, ringing up $687.7 billion. Second place went to gas stations with convenience stores, and third to fast-food restaurants.)
 
Other findings: Franchises accounted for nearly $1.3 trillion of the $7.7 trillion in total sales in 2007. They paid $153.7 billion in salaries to 7.9 million employees, out of a total workforce of 59 million and $1.6 trillion in total payroll. 
 
The survey – conducted as a partnership with the International Franchise Association – also found that 77 percent of all franchises are franchisee-owned. (Check out this Inc. guide to franchises.) 
 
Are the franchises fees worth it? Tom Curdes, an Ohio owner of two outlets of Weed Man, thinks so.
 
The Canadian company helped him write his first business plan, which in turn helped him get financing to buy a 16,000-square-foot-building.
 
"Had it not been for my franchisor, who worked with me very diligently to put a business plan together, I probably never would have done this," Curdes told the Toledo Blade. Curdes, whose franchises had $750,000 in sales last year, added: "The national buying power and the negotiations they do for us behind the scenes … I couldn't do that myself."
 
Said IFA spokeswoman Alisa Harrison: "With franchising, you can get into business for yourself but not by yourself. [It] is also a great way to grow your business."

Last updated: Sep 23, 2010

Inc. contributing editor COURTNEY RUBIN was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.




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