Franchising plays a significant and easily overlooked role in the commercial world’s economy. Most of us are used to thinking of the big economic players as being big corporations and the stock market movers and shakers. While these companies are the major economic forces in the market, franchises are the nimble business model that fills in the gaps between other business models, providing a much-needed path to success for those who might not have made it any other way.
Franchises are one of the only opportunities where you can get in on the ground floor, without formal degrees or training, and still have a self-sufficient living. They are a rare economic advantage to minorities, women, and those from low-wealth areas. A small business loan is enough to launch a franchise location, with plenty of different industries to choose from, and then – as long as you’re successful – you’re set for life.
Franchises also provide an indirect workforce development push. This is because owning a franchise location is a good training ground for the franchisee, who will always be able to benefit from the experience of running their own business.
The benefits extend beyond the franchisee. In the first place, every new business opened is a few more local jobs. Thus, when a person leaves the workforce to become an entrepreneur, not only are they one less unemployed person, but they become job-creators as well. Franchise employment accounts for about 3% of domestic GDP, adding over 8 million jobs to the labor market.
Franchises also provide a needed boost of business diversity, innovation, and competition. Unlike a large business, a franchise can usually move into an existing property and set up shop, filling a vacancy and keeping our shopping areas robust. Franchises stimulate the economy without the larger overhead of big box stores and industries.
Of course, like any business, a franchise also provides the local government with tax revenue and stimulates the local economy through its co-dependence on local services and materials. In short, a newly established franchise location helps other businesses grow. You can pack a strip mall with six franchises and have a thriving commercial district practically overnight.
So what’s the difference between a local entrepreneur opening a franchise outlet, and just having that entrepreneur start up their own business from scratch? Franchises have a lower failure rate than newly-launched non-franchise businesses. The average franchise has brand recognition going for it, handling the broad-scale marketing while the business owner simply focuses on running their outlet. At the very least, a franchise is a proven template for a small business that thrives.
Overall, the franchise business model is a necessary component of maintaining a robust economy from a global perspective. It diversifies market share, stimulates competition and market improvement, and is an important avenue for economic growth among those with fewer opportunities in other pursuits. It represents the best of both worlds; independence for the entrepreneur, but with a boost from a recognized brand name and standardized practices so the entrepreneur has the greatest chance of being successful. Many franchises are only in one geographical market, but many franchises have locations in numerous geographical areas.
