Reducing the risk of business failure

Statistics show that something like 40 out of every 100 businesses will fail within the first three years. The average failure rate of franchised businesses is less than six out of every 100 (2001 FANZ Survey of Franchising).

I wonder if the above comments are a true reflection of the state of franchises or whether they "paper over the real truth"
I'm not a profit of doom just someone who is looking for some honesty when it comes to statistics.

Ok so this is USA based but there is more than a modicum of truth here when it comes to Australian experience as well.

"Anyone looking for reliable data on failure rates of individual franchise units faces a tough challenge, because the franchise industry uses a weird definition of "failure." Consider: If your business sank so deeply into the red that you were forced to give up on it and eat your losses, wouldn't you call that a failure? Most would...

When a franchisee doesn't prosper-indeed, loses his shirt-what usually happens is that the franchisor simply takes back the unit (without reimbursing the hapless franchisee one dime) and sells it to somebody else.

As long as the shop doesn't close its doors, it isn't a "failure" as the International Franchise Association defines the word. That is why, when asked for the failure rate of franchised businesses, the IFA says it is 5% a year. Wow! Just 5%! Sounds as if making money on a franchise is practically a sure thing!

Time for a reality check: The scant research that exists suggests that, as risky as starting an independent business is, buying a franchise is an even bigger roll of the dice. In the early '90s Timothy Bates, a professor at Wayne State University, studied Census Bureau data on 20,000 new enterprises and found that 38% of franchise units failed over a four-year period, vs. 32% of independent startups. In some industries the gap was much greater. In retailing, for instance, 45% of franchised units lasted less than four years, while just 23% of independent retail stores flopped. Risk/Reward

When it comes to starting business, making an existing business more profitable, even buying a franchise there is one common denominator that you need to take into consideration .... YOU

Regardless of the business you need a plan and a budget, something that you can measure your weekly/monthly activity against to enable you to say ... "we did better than planned but I think we could have done even better" or "that month was a dud, what was it that we missed that we aimed for".

If you think that a franchise is the way for you to get into business do it with your eyes wide open ... it's no less risky than the alternative (and it could be even more risky).