Franchise Business Review (FBR) just released a special report on franchising and franchisee satisfaction. This report looks at the data from their annual survey of more than 22,000 franchisees in order to explore the state of franchising in 2012, including what concepts and models are most popular, what’s involved from an investment and financing standpoint, what skills and attributes contribute to a franchisee’s success, and how franchisee satisfaction at some of the top brands has fared in the past year.
Michelle Rowan, president of FBR, has a background in Sales in the Hospitality Industry, Sales/Customer Service in the Telecommunications Industry, and has been with FBR for the past 7 years.
Franchise Chatter (FC): What factors contribute the most to a typical franchisee’s overall satisfaction?
Michelle Rowan (MR): I think the easy answer is making money. But beyond that, it’s enjoying what they do, believing they are a valued part of the franchise brand and that they are heard and supported by the corporate staff, seeing their brand and business as a success in comparison to their competition today, as well as their long-term growth opportunity.
FC: Which franchise sectors have the highest satisfaction ratings? Why are these sectors favored by franchisees?
MR: This year, Cleaning & Maintenance and Fitness — a new category for us — topped our list. They were both higher than the industry averages across the board, but rated the Core Values section much higher. This section includes questions about their respect for the franchisor and whether they feel the franchisor cares about their success. They also rated their long-term growth opportunity much higher than the other sectors.
FC: What are the most common complaints among franchisees?
MR: That franchisees aren’t involved in company decisions, or expectations that were set are not being met by the franchisor.
FC: Which franchise sectors have the most dissatisfied franchisees, and why?
MR: The Food sector consistently scores lower than others every year. I think it has to do with all the challenges the franchisees in that segment face: employee turn-over, food costs, and the expense/equipment involved to start a food franchise.
FC: What is your growth forecast for the franchise industry as a whole in 2012?
MR: The International Franchise Association forecasts 2% growth in 2012 for the industry, and we are actually thinking it might be slightly higher than that. Franchisees are much more optimistic than they have been in previous years, but the economy as a whole is still rebounding.
FC: What are the expectations of franchisees for revenues and profits this year? Are there certain franchise sectors that stand out for their profit potential?
MR: As I mentioned, franchisees are optimistic about their profits this year. Senior Care and the Food sectors showed the most profitability, but it’s also important to look at the investment made into the franchise. Franchisors are now more focused on unit profitability, which is more important than revenue for the franchisee’s success.
FC: Are franchisees finding it easier or more difficult to obtain financing in 2012? What financing options are popular among prospective franchisees today?
MR: 2012 vs 2010? Absolutely. But it’s still hard compared to five or six years ago due to the changes in bank lending. 401K rollovers are still a popular way to finance new franchisees, and franchisors have jumped in to help reduce the cost of their offerings; some even offer financing to candidates themselves.
FC: What surprised you the most about the results of this year’s survey? Any significant changes from past years?
MR: Satisfaction is going up! The comments support that franchisees are feeling more supported by the corporate office and that the company cares about their success and profitability. I think five years ago this would have been surprising, but really it’s why these brands are still around and growing when times got tough the last few years.
Franchisees and franchisors have a tough relationship to balance, but when their goals are in line, and the corporate team is clear in outlining their goals and expectations, and then deliver on it, we see great things happen at the local and national level.
FC: What advice can you offer prospective franchisees when evaluating a franchise opportunity?
MR: It’s easy to find a lot of information on the internet, which is great, but it’s critical to talk to existing franchisees. Is franchising what they expected when they got into it? Be sure to talk with newer franchisees that have recently gone through the initial training and on-boarding. Find out how much money they think you should have in the bank to support yourself until you are in the black.
FC: What are you doing to increase the level of participation among franchisors in your survey going forward?
MR: We already make it available at no cost, and it’s completely confidential, so I am not sure what more we can do at the survey recruitment level. However, we are doing more to promote our research findings online and in the media, and franchisors are becoming much more savvy about franchisee satisfaction and the importance of an outside survey; hopefully it will become an industry standard. Prospective buyers are making it a must-have in their buying decision, which will continue to push franchisors to do it.
FC: Is there anything else you wish to share about the results of your survey?
MR: We know our results are higher than the industry as a whole because there are systems out there that just don’t care what their franchisees think, or are not ready to do anything to change it. But we have the privilege to work with hundreds of brands that really get how franchising can be a proven model for business success. They are focused on helping individual franchisees succeed and grow their businesses, and they see their franchisees as partners in growing the brand.