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Unformatted text preview: often choose a large chain in order to feel secure; others prefer to invest in a smaller,
newer outfit, hoping that chains like Buck’s Pizza or K-Bob’s Steakhouses will become the next McDonald’s.
Advocates of franchising have long billed it as the safest way of going into business for yourself. The International Franchise Association
(IFA), a trade group backed by the large chains, has for years released studies “proving” that franchisees fare better than independent
businessmen. In 1998 an IFA survey claimed that 92 percent of all franchisees said they were “successful.” The survey was based on a
somewhat limited sample: franchisees who were still in business. Franchisees who’d gone bankrupt were never asked if they felt successful.
Timothy Bates, a professor of economics at Wayne State University, believes that the IFA has vastly overstated the benefits of franchising. A
study that Bates conducted for a federal loan agency found that within four to five years of opening, 38.1 percent of new franchised
businesses had fai...
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- Spring '08