What's Up? (And What's Down?)

Want to know what’s really happening in franchising? We crunched five years’ worth of data—and found trends you might have missed.

- KIM KAVIN

Franchising is full of numbers. But which numbers really tell the story?

If you're looking to buy a franchise, you can easily drown yourself in data. Just pick up a company's franchise disclosure document (FDD), and you'll see granular breakdowns of the brand's health. That's important stuff. Look closely!

But what does it look like to take thousands of brands' data, and track them across years? The answer: You see big-picture trends that no single brand can ever capture.

That's something Entrepreneur can uniquely do, because we collect mountains of information on thousands of franchises every year. Usually, we use that information to rank the strongest franchises in our annual Franchise 500 list (which we publish every January). But now, for the first time ever, we also crunched that data and started to look for industrywide trends-and boy, did we find them.

We took five years' worth of data, and then analyzed it in slices. What we found were some curious statistical anomalies: Failure rates change depending on how much a franchise costs to buy! Franchise fees are up in some places, down in others! Some categories are thriving, and others are coasting!

Then, we started calling up experts to ask: What's going on here? And what do franchisees need to know? On the following pages, you'll find four surprising trends-and the need-to-know explanations behind them.

TREND 1
Low-Cost Brands Have Higher Failure Rates

There's a franchise for almost every budget. Some brands can be started for only $10,000, for example, while others cost $100,000 or even $1,000,000 (and every number in between, and beyond). But Entrepreneur's research identified a curious trend: Franchise brands with lower initial investments tend to have higher termination and closure rates which is to say, franchisees of low-cost brands tend to fail more often.