the search for FRANCHISE EXCELLENCE

A new survey from the Franchise Relationships Institute sheds considerable light on the ingredients for success in franchising by looking at how the backgrounds, lifestyle, work habits and personal characteristics of franchisees impact on their success. The goal of the study was to understand what factors make a significant difference to franchisee performance and satisfaction, and learn what franchisors can do to recruit, train, support and lead their franchisees more effectively.

Much of the power of the Franchise Excellence Research Report lies in its size and rigour. For the Australian and New Zealand part of the study, 1,852 franchisees across 50 franchise systems were surveyed using an in-depth 210 item questionnaire. The researchers then went to the franchisors and, without revealing any of the personal information gathered from the franchisees, had them complete performance measures on each one. The highly-experienced FRI team then completed an in-depth statistical analysis of the data to determine the relationship between the personal characteristics of the franchisees, their performance and their satisfaction.

The resulting report runs to 14 chapters including:

• The current state of franchisee satisfaction
• How 16 psycho-social attributes impact on specific aspects of franchisee performance
• The franchisor perspective on poor performers
• The impact of background and demographic factors on performance and satisfaction
• The impact of work patterns and family involvement
• How do multi-unit franchisees differ from single unit franchisees?

The research identifies five key attributes that most strongly impact on franchisee performance across all franchise systems and, in the final chapter, puts all the pieces together to create The Franchisee Wheel of Excellence – a useful model that sums up the critical factors to have come out of the study and provides a basis both for franchisees looking to improve their performance and for franchisors looking to recruit new franchisees.

At 118 pages, the report is too long and too important to summarise here; there’s just too much detail and analysis. Suffice it to say that every franchisor who reads it will find new information to stimulate them and provide a new perspective on their own particular business. Below, we’ve outlined a couple of areas that demonstrate the report’s style and scope.

The Franchisor Perspective On Poor Performers

One of the techniques the researchers used to judge satisfaction was asking franchisees the question, ‘Would you buy into the same franchise again if given a choice?’ It’s a useful approach and, for the record, 63 percent of franchisees said ‘Yes’, 16 percent said ‘Unsure’ and 21 percent said ‘No’. They also asked franchisors a similar question: ‘Based on what you now know, if you had your time over would you select this franchisee into your franchise system?’ Their responses are as follows:

Definitely Yes – 33%

Yes – 39%

Unsure – 13%

Probably Not – 9%

Definitely Not – 6%

Given the long-term nature and inevitable ups-and-downs of the franchise relationship, for franchisors to say that they would select 72 percent of their franchisees again is a pretty positive score. Seeking more information, though, the researchers figured that there was more to be learned from failure than success and asked franchisors who did not respond with a positive the reason why they would not select this franchisee again. 16 reasons emerged, with the top 4 being cited in between 10 and 20 percent of cases. These were:

Lack of operational commitment. Franchisors were disappointed in franchisees who had no real understanding or appreciation of what is needed to make the business work. Passive investors or part-time operators were frequently mentioned, while there were a substantial number of comments about the franchisee’s involvement with the business having dwindled over time. Later in the report, hands-on involvement by franchisees emerges as having a significant impact on performance.

Lack of ‘get up and go’. The second strongest theme to emerge was a lack of pro-activity, drive or ambition to take the business to the next level. Franchisors felt the franchisees in this category ‘expected the system to drive itself.’

Poor compliance. There’s a common tendency for franchisees to ‘push back’ against the franchise system as their confidence grows, but where this results in a lack of compliance to company standards it becomes a problem. Franchisors frequently mentioned that franchisees ‘thought they knew what was best rather than drawing on the proven track record of the business model.’ Failing to comply with reporting was also commonly mentioned – see our article on benchmarking to see why this matters so much.

Negative attitudes or behaviours. Franchisors frequently mentioned individual franchisees who were not willing to maintain a professional working relationship with the franchisor or with other franchisees. Aggressive and combative behaviour was also commonly cited. One of the attributes measured in the study was Conflict Proneness, defined as the tendency to be suspicious and hostile towards others. This undermines constructive participation and increases levels of conflict.

Other factors mentioned by franchisors included such varying issues as Lack of Business Acumen; Resistance to Change; Personal or Family Reasons; and Poor Grasp of English.

The report’s authors note that, ‘In particular, “get up and go” has emerged as an attribute franchisors consider particularly important for success. Perhaps franchisors that emphasise the power of their franchise system to create success make a rod for their own backs by underplaying the effort that franchisees need to put in to make the system work.’

Education – How Much Is Too Much?

Another example of the breadth of material the Franchise Excellence Report covers is that of education. The 1,852 franchisees were divided into four groups: those who had some high school education; those who had completed high school; those who had completed a university or college degree and; those who had completed a post-graduate degree at university.

The results showed that the highest-performing franchisees were those who had completed high school. Those with some high school education slightly outscored those with completed first degrees, but those with a postgraduate degree scored significantly lower. In fact, the high school leavers group achieved performance scores a massive 10 percent higher than those with a post-graduate qualification. The findings were consistent for three key performance measures: Financial Achievement; Customer Experience; and Constructive Participation.

It’s worth noting that franchisees with a post-graduate degree also scored significantly lower on two of the key attributes of successful franchisees: Brand Passion and Sales Orientation. And the survey also found that the more education a franchisee has, the lower their level of overall satisfaction with the franchise.

Looking for reasons behind its findings, the Franchise Relationships Institute suggests that, ‘People with higher education are more likely to ask questions and challenge the status quo as this is what a higher education trains you for. This behaviour would appear not to be useful when running a small business, especially in a franchise system which will already have set operational procedures in place.’ That’s not to say that franchisees are not expected to be quick to learn, quick to adapt and quick to exploit opportunities: it’s just that, often, acting is more effective than arguing.

At a time when more young people than ever are going into tertiary education – and incurring significant debt to do so through student loans – the findings are bound to ring some alarm bells among franchisors. The ‘average’ franchisee who responded to the survey was 47 years old and completed high school, meaning that the next generation of franchisees coming through is more likely to have tertiary education and, apparently, be more likely to question systems and express dissatisfaction.

As the Franchise Excellence Report concludes, ‘If success in a franchise system requires the implementation of systems rather than the challenging, questioning or re-inventing of systems, franchisors need to consider how they will challenge the intellectual and creative talents of franchisees with a higher education.’

Conclusion

The examples given above provide just a small flavour of the sort of information to be found in the full report. As Steve Wright, CEO of the Franchise Council of Australia, says, ‘The work is extensive and the output prodigious. There are business-useful insights on just about every one of the report’s 118 pages. I commend it to all franchisors and advisers.’

At A$790, the report is not cheap but it is hugely valuable. Like FRI founder Greg Nathan’s earlier work, Profitable Partnerships, it is a must-read for every franchisor and franchise staff member in the country. It will improve their understanding of the people within their own system, their strengths, weaknesses, limitations and motivations. It could also have a huge impact on how franchisors recruit, lead and manage their franchisees. Our verdict? Buy it.

About The Report

The Franchise Excellence Research Report 2012 is published by the Franchise Relationships Institute at a price of A$790, with a discount for second and subsequent copies. The report can be purchased from the FRI website.

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