Franchising has become a popular choice for entrepreneurs due to its high success rate. According to the International Franchise Association, 90% of franchised businesses succeed, in contrast to the 63% failure rate of non-franchised businesses in their first six years. This success rate is one of the main factors driving the preference for franchising as a business form.
One of the advantages of franchising is its ability to simplify the entrepreneurial process. Entrepreneurs often struggle to identify societal needs and create profitable solutions. However, the franchise format eliminates the need for the entrepreneur to define the market demand, as the franchised business already offers a proven solution. This allows the entrepreneur to bypass the challenging need-defining phase and focus on providing consumers with an established product or service.
This ability to skip the need-defining phase is crucial, as it is closely associated with the high failure rate of non-franchised businesses. Need-defining is comparable to creativity in the entrepreneurial process, while innovation represents the act of implementing and executing ideas. By purchasing a franchise, entrepreneurs can benefit from the initial creative work that has already been done, and they can be confident that the identified market need is accurate. This is one of the reasons why entrepreneurs are increasingly turning to franchises as a means to start their businesses.
