Today’s award for bogus franchise survival statistics goes to… Champion Clean!
Sean Kelly wrote an article on bogus franchise survival rates (Lies, Damn Lies & Franchise Statistics) that said to beware of franchise companies using claims like this one (from the Champion Clean franchise website):
According to a Departement of Commerce study, most new independent businesses fail. The data indicates that only 43% of newly started businesses survive until their second anniversary and only 33% are still operating after 3 years. That means almost 70% of new businesses don’t make it through 3 years!
To minimize their risks, many consider purchasing a franchise opportunity – and the reasons are obvious. The same Commerce Department study showed 94% of franchise businesses were open after 2 years and 93% after 3 years.*
These franchise survival statistics are fraudulent and franchise marketers know it (or should). These stats were publicly discredited in Congressional sub-committee hearings back in the late 1990s. In 2005, International Franchise Association President Matt Shay issued a warning via a widely circulated letter and email to members which said:
…It has come to our attention that some IFA-member companies may be providing information about franchising that is long out of date and no longer presents an accurate picture of the sector.
Of particular concern is information claiming that the success rate of franchised establishments is much greater than that of independent small businesses.
Many years ago, the U.S. Department of Commerce conducted studies about franchising which presented such statistics. That information is no longer valid. The agency stopped conducting such studies in 1987.
We strongly urge you to remove any information from your Web site and published materials that make such a claim. The use of such data, in the absence of current research, could mislead prospective franchisees who are attempting to conduct responsible investigations….
Yet franchisors, brokers, franchise websites and other cloud merchants continue to sell the illusion of franchising being a virtually risk-free way of being in business for yourself, but not by yourself.
How many life savings and homes are put at risk each year by trusting franchise owners who think they have all but eliminated the risk of business ownership by buying a franchise – any franchise?
How many franchise prospects also believe in the illusion that franchising is somehow regulated, and that some law enforcement agency, the FTC, or someone is preventing franchise sales creeps from telling blatant and public lies in order to part newbies from their hard-earned money?
How many millions of your tax dollars are repaying banks for the SBA-guaranteed loans the proceeds of which were paid to franchise charlatans who misdirected qualified prospects from legitimate franchise opportunities?
Maybe Champion Clean didn’t get the memo.
Maybe Champion Clean didn’t get the IFA memo. Maybe they did and don’t care. Or maybe they hired a clueless and/or sleazy franchise marketing or web company.
Either way, I’d be real wary of franchise companies that want you to think you can’t fail… especially when so many others say they already have. (See CHAMPION CLEAN: Is This Franchise a Rip-Off?)
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* Text & Chart: Champion Clean web site.