i want to know why majority of franchise succeed and sole traders fail in their first year of business?

Answer 1

There are a number of reasons:

1 - Franchises are already established businesses. They have already proven that their business concept work and that their business idea is valid, hence the owners are replicating the business through franchising. They already know that there is a demand for their products

Sole proprietors, on the other hand, have to wrestle whether their business idea is viable, and whether there is a demand for their products or services.

2. A franchisee cannot be approved without proving that they have the resources and capital needed to run the franchise effectively. They have the resources in place.

Sole traders often operate on the fly and on the shoestring, trying to make do with what they have. Unfortunately, lack of resources mean lack of opportunity to do many things needed to run the business well. Hence they fail.

3. Franchises have the benefit of branding. They come in with a "good name" that is familiar, if not well known to the consumers. Think of a Subway franchise -- you already have the benefit of people knowing what a Subway is. Compare that to Nenita's Subs and Fries, which no one knows about

4. Franchises have the support of a knowledgeable management team who already knows what works, what does not work, and how to run the business. Hence, they offer training, even helping franchisees find the best location for the business. They have already studied what works in terms of the store decor and layout.

Franchisees are coming out of the gate with all these information, data and knowledge that a sole proprietor has to learn through trial and error

5. Supply chain for franchises is already set -- the franchisee don't have to spend time looking for the best suppliers for the business in terms of both quality and price because the franchise owner already did that for them.

Compare that with the sole proprietor who may need to spend the better part of their initial startup period looking for suppliers, manufacturers, etc.

Answer 2

As a sole trader, unless you have a clear plan to fill a market shortfall, you will inevitably , without solid product/service research fail. Franchises will charge more for the benefit of the research a sole trader could do themselves. Sole traders tend to take the short-cuts and thereby fail in the first year.

Answer 3

I think it is because of reputation and good will.
A franchise can give customers a certain degree of reputation.
If one more McDonald is opened, you would think that it is more or less of the same standard of the other McDonalds.
A sole trader has no good will and reputation at the very first beginning. It takes time to build up.
So that's why normally sole traders suffer from loss at the beginning of their business lives.

Answer 4

The answer to your question is "high risk". agood number of small business fail at the start of their business because enough research is not made on the environment of their business proposal. when this is the case money invested would not be fully regained.