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AEI:

We obsess a lot at Ethical Corporation about ‘big business’ but the businesses that touch us every day are local shops. Many have international brand names on their signage, but are licensed and operated by our neighbours.

In the Middle Ages, kings granted rights to collect taxes, brew ale, or operate meat markets, collecting a royalty fee. Here are the modest roots of franchising, which began growing in the 1960s, after a hamburger shop named McDonald’s in suburban Chicago started spreading its seed across America.

Today, it is estimated that the 767,000 franchised businesses in the US account for 45% of retail sales, generating $1.4 trillion in yearly revenue.

The UK turnover of franchised businesses, £10 billion, is far smaller, but growing. And franchising is exploding in Asia, particularly China, India, and Eastern Europe. Fornetti, the Hungarian-based baking company, is already Europe’s third largest franchiser.

Huge growth has spawned an expanding market in franchising magazines and internet tout sites. Who hasn’t heard the apocryphal story of the middle manager who opened up a sign shop or burger-flipping joint only to retire on a yacht in the Caribbean?

‘The good news is that the likelihood of you failing as a franchisee is fairly remote,’ states ‘Business Opportunities’, one of dozens of sites feeding the franchising frenzy. ‘According to the US Small Business Administration, roughly 30% of all non-franchise businesses fail within the 1st year.’

Articles invariably tout a 25-year-old study by the International Franchisee Association, claiming 95% of all franchises succeed. Don’t Believe It.

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