The business model for franchises in the United States
has come a long way since 1851 when I.M. Singer & Company began charging people for the rights to sell its sewing machines in specific geographic areas. Since then, the popularity of the business model has skyrocketed, and many of the most famous franchise brands in the world were started in the United States, including McDonald's, 7-Eleven, KFC, among others.
In fact, the U.S. franchise sector is projected to continue growing. In 2016, there were 733,297 franchise establishments in the country, according to a report by IHS Markit Economics
, an economic analysis firm. That number is expected to climb to 745,078 by the end of this year, creating an additional 233,828 jobs.
Some experts, like businessman, public speaker, and New York Times bestselling author John Naisbitt
, consider franchising to be "the single most successful marketing concept ever." Others have said that franchises can offer great business opportunities for entrepreneurs, and that franchises often are an economic boon for entire cities, regions, and countries. In the United States, franchises create jobs, contribute to GDP growth, accelerate business investment, and boost consumer spending.
But what is it about the franchise business model that has made it so popular and successful and why should anyone invest in one? Here are some reasons why you should consider investing in a franchise and how you can get started.
The Franchise Sector Is Projected to Grow
The franchise sector has shown steady growth over the past few years, and economists expect this trend to continue. In fact, the GDP of the franchise sector is projected to outpace overall U.S. economic growth this year – 5.1% to 3.9% – according to a report by IHS Markit Economics. The franchise sector also created approximately 680,000 jobs between 2013 and 2016 and is expected to generate 233,828 more jobs this year.
These figures bode well for the resilience of the franchise sector as a whole, but you should always conduct research that is tailored to the specific franchise, industry, and geographical region you are interested in before making any decisions.
Earlier this year, Fortune magazine reported that the U.S. Small Business Confidence Index, which gauges how optimistic business owners are about the economy, rose to a 12-year high as business owners anticipate that the current presidential administration and Congress will enact business-friendly policies designed to boost the U.S. economy.
Additionally, U.S. GDP growth has exceeded expectations this year, according to a report by the Washington Post. Between July and September, the U.S. Bureau of Economic Analysis reported that U.S. GDP expanded at a rate of 3%, which outperformed many economic forecasts. Wall Street has also seen a record-setting year. The Dow Jones Industrial Average has crossed several milestones, including surpassing 23,000 points for the first time in history. Overall, the Dow has climbed over 4,600 points since Donald Trump was elected president, according to CNN Money.
With the economy showing little signs of fatigue, optimism about a pro-business agenda in Washington, and promising growth projections in the franchise sector, this could very well be a good time for you to consider investing in a franchise.
Independent Businesses Can Be Risky
Starting your own businesses can be a risky venture. The U.S. Small Business Administration reports that half of new business establishments will go out of business within five years, and two out of three will fail within 10 years. Although all businesses – including franchises – have some degree of risk, franchises are often less risky than independent businesses.
First and foremost, franchises are typically backed by brands that are well-established in their industries, which gives investors a successful business model, credibility, and, in some cases, name recognition that they would otherwise have to build from scratch if they had an independent business.
Additionally, franchises have extensive experience in their fields and offer franchisees a support system that can help them succeed, increase revenue, and even expand operations. After all, franchisors have a vested interest in their franchisees' success.
Many people have seen the benefits of the franchise business model and have invested in them. In fact, millennials are increasingly choosing to buy franchises because they see them as a safer investment than launching their own company. Andrew Gruel, a millennial and co-founder of fast-casual restaurant franchise SlapFish, which recently entered into a deal to build 75 franchises in the Middle East, says his peers are opting for franchises because "they see franchise agreements as a built-in insurance policy. [Franchises have] got proven data, unit economics, operations manuals, legal protections … and that's built-in safety."
Technology and Digital Marketing Strategies Are Helping Franchise Business Succeed
Social media and the Internet are playing an increasingly important role in a franchise's success. If these tools are used correctly, they can help businesses increase their revenue.
Digital marketing, search engine optimization (SEO), and franchise directories can help franchises increase their web traffic and convert that traffic into leads—even businesses in industries, like home improvement and auto loans, which may not top Google's list of most popular search terms.
Even though digital marketing is a crucial part of a franchise's success, you must be careful when purchasing these services. As we will mention later, many companies and directories charge a lot of money, but they do not have the capacity or know-how to get the results you need.
You Can Jump-Start Your Career as an Entrepreneur
Investing in a franchise can jump-start your career as an entrepreneur. After all, it is a quick way to invest in a proven business model.
Buying a franchise allows you to use a name and business concept that have a track record of success, which can translate into a lower failure rate. Additionally, if you invest in a more well-known franchise, you also inherit its reputation and name recognition.
Many franchises also offer a long list of benefits to its franchisees. For instance, franchises often help with marketing and you can network with other franchisees. Some franchises will even help you scout locations, train you and your employees, offer you advice from experienced professionals in your industry, and provide an ongoing network of support.
It should come as no surprise that franchises and entrepreneurs need guidance. There is a lot of incorrect information out there and many franchises are doing it all wrong because they have either been misled, lack the resources, or just don't know where to start. Additionally, most business listing websites lack the technology they need to achieve the results that franchises are looking for—and to make matters worse, they charge you money for bad services.
If you are a franchisor and are finding it difficult to sell more franchises due to a limited marketing budget and/or unsuccessful marketing strategies, you're not alone. All USA Franchises can dramatically increase your online exposure to entrepreneurs and investors, and its parent company, WebFindYou
, the global leader in All-in-One Digital Marketing Technology, can dramatically increase your Internet exposure, help further grow your brand, sell more franchises, and dramatically increase revenues at the franchisee level - a complete win!
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