Do franchises fail less than independent businesses? The honest answer

• No Australian franchise failure rate exists. In 2023 the ABS could not build a time series from Register data because of survivorship bias.
• All new businesses: of 442,555 that started in 2021-22, 75.0% were still trading in June 2023, 56.7% in June 2024 and 48.0% in June 2025 (ABS, December 2025).
• Size matters: by June 2025, 43.3% of non-employing businesses and about 61.0% of employing businesses were still trading.
• US evidence is mixed: Census Bureau research found new franchises survived less often than new independent businesses, and US regulator staff found franchise loans defaulted slightly more often (3.9% against 3.5%).
• The claim that 90% or more of franchises succeed traces to an unaudited 1980s US survey that franchisors filled in voluntarily. It is a myth, not Australian data.

• The claim that 90 to 95% of franchises succeed is a myth: no Australian data supports it.
• A 2013 Entrepreneur article, republished by NBC News, traced it to a 1980s US Department of Commerce survey of nearly 2,000 franchisors who chose whether to answer. The data was not audited, and the respondents probably included more successful franchises than unsuccessful ones.
• A 1994 US Census Bureau working paper by Timothy Bates tracked firms started from 1984 to 1987 through to late 1991. Franchise start-ups had lower survival rates than independent start-ups, and the independents were more profitable, even though the franchises were larger and better capitalised.
• Bates's 1998 follow-up found the answer depends on the data: franchises looked better when counted by location, but among genuine newcomers franchise survival rates were low. Established multi-unit franchisees drove the better results.
• US Federal Trade Commission staff analysed 66,291 SBA-backed franchise loans from January 2013 to September 2023: 3.9% defaulted, against 3.5% for other small business loans. Staff said they couldn't be certain franchise loans were riskier simply because they were franchises.
• Most franchise brands in that analysis had loan default rates of 1% or less, but a few outliers were far higher, one at 20%.
• None of this is Australian, and US lending and markets differ from ours.

The ABS tracks every business that starts trading, but it can't tell franchises apart from other businesses. These figures cover all new businesses.

• Of 442,555 businesses that started in 2021-22, 75.0% were still actively trading in June 2023, 56.7% in June 2024 and 48.0% in June 2025.
• By size, the share still trading in June 2025 was 43.3% for non-employing businesses, 60.1% for those with 1 to 4 staff, 68.8% for 5 to 19, 77.4% for 20 to 199 and 82.4% for 200 or more.
• Across all employing businesses, about 61.0% were still trading, calculated from the ABS counts.
• In food and beverage services, a common franchise sector, about 47.5% of the 17,969 businesses that started in 2021-22 were still trading in June 2025. This is summed from state figures that the ABS slightly adjusts for privacy, so it is approximate.
• 'Survival' here means still actively trading. A business that was sold, merged or closed voluntarily counts as an exit, so an exit is not necessarily a failure.
• For scale, the ABS counted 2,814,778 actively trading businesses at 30 June 2026, with 460,461 entries and 375,331 exits during 2025-26.

• Brand exits: of 1,214 brands Griffith tracked between its 2014 and 2016 surveys, 48 were no longer operating and 61 had stopped franchising, about 9% in total. What happened to their franchisees wasn't recorded.
• Unit turnover: FRANdata reported an 11% unit turnover rate across about 900 brands in 2015, and 18% for food concepts. Its public summary doesn't define turnover and discusses transfers alongside other exits.
• Disputes: franchisors in 2016 estimated that 1.8% of franchisees were in a substantial dispute, which is a franchisor view only.
• System churn: item 6 of each disclosure document counts transfers, closures, terminations, non-renewals and buy-backs for the last three financial years, but only for that system.
• The Franchise Disclosure Register shows current outlet counts, not how many outlets have closed.
• The 2023 review recommended collecting franchisee ABNs through the Register so the ABS could measure churn or failure in future.

• A struggling franchise can be sold rather than closed, so the outlet 'survives' even if the owner lost money. Item 6 records these as transfers.
• Unit, owner and system failures differ: a site can close while the brand thrives, and a franchisor can fail while some of its outlets keep trading.
• Survivorship bias: registers and directories show the systems that still exist, not the ones that have gone.
• Franchisors hold most of the data, and they have an interest in presenting it well.
• Regulation can make franchising look safer than it is. Some stakeholders told the 2023 review that disclosure gives franchising the appearance of being highly regulated, creating a perception that it is low risk.
• Franchises may not be typical start-ups: Bates found US franchise start-ups were larger and better capitalised, yet still survived less often.

1. How many outlets were transferred, closed, terminated, not renewed or bought back in each of the last three financial years? Item 6 of the disclosure document must show this.
2. What is the history of the site or territory I'm considering, and how many owners has it had? The disclosure document must cover the site's history.
3. Can I speak to former franchisees? Item 6 must give their name, location, phone number and email address where available.
4. What percentage of franchisees were in mediation, conciliation or arbitration last financial year (item 4)?
5. How long have current franchisees owned their outlets, and how many are still on their first agreement?
6. How much working capital did recent franchisees need before they could pay themselves a wage?
7. What does the agreement say about exiting early, selling, and compensation if the franchisor ends it early?

• Three years of item 6 churn figures, compared with the total number of outlets.
• The history of your site or territory, including how many owners it has had.
• Conversations with several current and former franchisees, including some who left recently.
• Your own cash flow forecast, tested against lower sales and higher costs.
• The franchisor's solvency statement and financial reports, which item 21 requires.
• Independent legal and accounting advice before you sign.