Franchise Brokerage Outfit Claims Dizzying Success Rates

By now, there’s one thing that you should know about me;  I don’t spin things.  At all.
And, I don’t have to.

Here’s why;

I’m a WYSIWYG guy. (What You See Is What You Get) If I write something about a particular topic, it’s not by accident. I mean it. Same thing goes for things that I do verbally; I always say what’s on my mind. I rarely sugar-coat things. Oddly enough, my lack of sugar-coating is becoming more prevalent as I get older. (I heard somewhere that things mellow as they age. Obviously, I missed that bus.)

In other words, when it comes to helping would-be franchise owners, I don’t and won’t spin things.

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Franchise Success Spin?

A couple months back, I responded via comment to a post on Palo Alto Online. In the post, a franchise broker, from the franchise brokerage I was a franchisee with was quoted. Here’s what Katie Fagan, a franchise broker in California said;

“Success rates appear to back them up: “The No. 1 reason businesses fail is lack of cash for working capital. After 10 years, only 16 percent of existing start-ups are still in business. With franchises, it’s 90 percent.”

I commented immediately because what she said was not based on current data. The success statistics she quoted were old. Really old. They were so old, my friend, and a guy that I would never want to get into a debate over mathematical statistics with, even chimed in on my chiming in. Read what the founder of Palo Alto Software-the company that produces the best-selling business plan software on the planet wrote in his post titled, “The Franchise King Echoes Mark Twain.”

I Was Threatened With Success Data

I must have hit one helluva note with my former franchisor, because they threatened to come up with some of their own data on franchise success rates. Kind of like a, “We’ll show you, Joel Libava! Just wait and see what we’re going to spin come up with.” Well, as promised, they just came out with some,  (ahem) data.

But, before I dig into some of it with you, I need to share a couple of things about my experience as a franchisee with this outfit.

1. I learned an awful lot about the brokerage side of franchising. Between the training that my late father gave me, and the training that I received from a real franchise master, I was schooled well.

2. That franchise master, (as I later found out) was also a master of spin. He’s a real smart guy-probably genius level IQ. Too bad he turned out to be full of crap. He spun almost everything that had to do with our own franchise. It’s too bad; I kinda liked him for a bit.

The brokers that bought out the original owner of our franchise got schooled in spin, too. That’s why I’m having a huge problem with the data they just released into the franchisephere.

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It Looks Good

The numbers that they released look great. According to this Press Release, in a detailed survey of 1,260 franchises it’s brokers sold from 2006 to 2010, 91.2 percent of the franchises were still in business after two years. That’s huge! And, if true, it’s a job well-done. Anything that can be done to move ready and willing people away from corporate America and into businesses of their own, I commend. Let’s see more of it! But, one thing troubles me about their, “survey.”

Stop. 

I have several friends that are used to be franchisees of this franchise. Marshall, who handles things in Florida is a serious hoot. Barney, the who was the most talented franchise broker in all of Ohio before he sold his business, is good people. And Keld is just the nicest guy. So, I’m not going to try to totally demolish their report. I just want to add some food for thought, as I wrap this post up.

1.  What data-compilation firm did the work?

2.  Did every franchisee, (broker) participate in this survey?

3.  How were the franchise owners contacted?

4.  The data was from 2006-2010. It’s 2012. How many of the 91.2% were still in business when they were contacted? In other words, were they in business for two years, but aren’t now?

5.  I was a franchisee (broker) for them from 2001-2008. The survey company never called me to ask how many people were still in business during those years that I helped.

To summarize, surveys, reports, and polls all have their place. And to this brokerage franchise’s credit, they did come up with some data.

But how?