franchisee satisfaction studythaifranchisedownload.com/dl/fbr-industryreport.pdf · areas of...

franchisee satisfaction study2007 industry benchmark report

©2007 Franchise Business Review. All Rights Reserved.

Satisfaction is EverythingOnce again, our annual study of franchisee satisfaction has exceeded all expectations. Without a doubt, this report represents the most comprehensive study of franchise owner satisfaction ever completed. We have surveyed thousands of franchisees representing hundreds of diverse franchise systems across North America. For this industry-wide report, we have compiled nearly one million survey responses from franchisees to present to you a clear picture of the current state of franchisee satisfaction and the overall health of the franchise industry.

To measure satisfaction, we ask franchise owners over 40 questions relating to training & support, systems, franchisor/franchisee relations, financial opportunity, market demographics, business lifestyle and general satisfaction with their businesses. And we don’t just survey a select group of franchisees – we invite every active franchise owner to participate. To date, we have surveyed over three hundred leading franchise systems and the results speak for themselves.

Franchisee satisfaction is one of the most important factors every potential investor should consider before investing in a franchise. There are thousands of opportunities available today. Some of these are great investments, but many are simply average or even poor. Existing franchise owners are the key to understanding the health of any franchise system. If you are considering buying a franchise, I encourage you to get as much feedback as possible from current franchisees before making your final decision.

Franchise Business Review is proud of the months of the work that went into creating this report and we hope that you find the information interesting and useful. If you would like to learn more about buying a franchise or you would like franchisee satisfaction information on a specific franchise system, visit us at FranchiseBusinessReview.com or call us at 866-397-6680.

Happy Franchising!

Eric StitesFounder and PresidentFranchise Business Review

May 2007 | Franchise Business Review 1

SURVEY RESULTS

Overall Satisfaction ........................................3

Training & Support .........................................4

Franchise System ...........................................5

Franchisor Relationship .................................6

Financial Opportunity .....................................7

General Satisfaction .......................................8

T A B L E O F C O N T E N T S

DEMOGRAPHICS

Franchisee Demographics ............................... 9

Market Information ........................................ 10

Business Lifestyle ..........................................11

SURVEY METHODOLOGY ......................................13

ABOUT FRANCHISE BUSINESS REVIEW ...............13

Use IRA, 401(k) and other Retirement Funds to capitalize your franchise

location(s) without the taxes, penalties or it being a loan.

The Original . . .

» with the EXIT STRATEGY that started it all in 1999,

» without the DOUBLE taxation.

The EXIT STRATEGY that reallypromotes multi-unit franchises.

SDCooper Company: 18141 Beach Blvd., Suite 300Huntington Beach, CA 92648 866-693-7767

www.ersop.com

franchisee satisfaction study 2007 industry benchmark report

2 Franchise Business Review | May 2007 www.FranchiseBusinessReview.com

The Benchmark of Franchisee SatisfactionThe Franchisee Satisfaction Index (FSI)™ is the industry standard by which the health of a franchise company can be measured and tracked over time. Established by Franchise Business Review in 2007, the FSI is a collective assessment of five critical areas of franchisee satisfaction. The FSI is used by franchisors and franchise investors to evaluate and benchmark the franchisee experience in order to make educated business and investment decisions.

In the last two years, Franchise Business Review has surveyed over 25,000 franchise owners on the satisfaction with their businesses. We have amassed the industry’s largest database of franchisee satisfaction information. This data makes our Franchise Satisfaction Index one of the most powerful tools for evaluating franchises, tracking operational performance and predicting future success.

The five areas of franchisee satisfaction included in the FSI are:

Training & SupportBusiness success is all about execution. And successful execution of a franchise business is all about the initial training, support and on-going development that franchisees receive from their franchisor.

SystemsProven systems and established procedures are why most people invest in a franchise versus starting a business from scratch. These are the things that make a franchise run smoothly, maintain a competitive advantage and achieve greater success over time.

RelationshipBuilding a successful business and making money are important to every franchise owner, but much of the long-term satisfaction and day-to-day enjoyment of a business comes from the strength of the relationship between franchisors and franchisees. Strong relationships can overcome many business challenges.

Financial OpportunityWhile the long-term financial goals of franchisees vary widely, making a living and earning a reasonable return on their business investment is something that most share in common. Satisfaction with the financial opportunity that a business generates is a primary driver to overall franchisee satisfaction.

General SatisfactionGeneral satisfaction is where the rubber meets the road. Has the everyday experience of owning a franchise lived up to the expectations of the franchisees? Would they recommend this franchise to others? And most importantly, would they do it again?

Understanding FSI

FSI can range from 0 to 100% and represents a weighted sum of positive responses to a specific question or a group of questions within one of the areas being measured for satisfaction. If you were to simply add up all the positive responses to a question, giving the same value to an “excellent” response that you give to a “good” or “very good” response, you would paint an overly optimistic picture. FSI provides a realistic view of favorable satisfaction ratings by weighting more positive responses and discounting lesser responses to any given question.

FSI ratings provide a reference point or benchmark to help gauge the overall level of franchisee satisfaction or satisfaction in a specific area. While an FSI of 66.2% on its own is not all that valuable, using it as a benchmark to measure against other areas, or to compare various franchise systems and industry sectors is extremely useful.

(fsi)FranchiseBusinessREVIEWTM

Sharing the franchise experience


Overall Satisfaction


Each of the five areas evaluated for satisfaction are summarized here in the overall snapshots. They are broken out by area and displayed as both average rating (on a scale of 1 to 5) and percent response. We include a FSI rating for each area, as well as an overall FSI rating.

In the pages that follow, we will explore each of these areas in detail. On pages 9 -11 we provide comprehensive franchisee demographic and market information to help provide a full picture of franchise owners throughout the industry.

Key Findings: Overall Satisfaction

The results of this study reveal that on the whole, franchisees are satisfied with their franchise business and the companies they have invested in. It is worth noting however that a significant minority expressed some dissatisfaction.

Even the best franchise systems have some dissatisfied franchisees among their ranks. This is completely normal and you should not necessarily be concerned about a little nega-tive feedback. That said, listen very carefully to these franchisees and try to identify their specific issues, and address these directly with other franchisees and the franchisor.

Every franchise is unique with different requirements, responsibilities and opportuni-ties. The most important question to ask when researching any franchise opportunity is...“Is this business right for me?” A good franchise system will help you answer this but ultimately it is up to you to fully understand all the aspects of the business investment.

Training & Support 3.4

System 3.7

Relationship 4.1

Financial Opportunity 3.5

General Satisfaction 3.8

Overall (average) 3.7

1 2 3 4 5 avg poor average good very good excellent rating

Average Rating: Overall Satisfaction Snapshot

poor average good very good excellent FSI*

Training & Support 9% 16% 23% 30% 22% 60.1%

System 6% 12% 19% 33% 30% 67.8%

Relationship 3% 5% 16% 36% 40% 77.4%

Financial Opportunity 5% 10% 23% 39% 23% 64.7%

General Satisfaction 7% 11% 18% 25% 39% 69.6%

Overall (average) 7% 12% 20% 30% 31% 67.9%

Percent Response: Overall Satisfaction Snapshot

*FSI - See Franchisee Satisfaction Index on page 2


Initial Training 3.7

Opening Support 3.6

Ongoing Training & Support 3.5

Field Support 3.3

Advertising & Promotion 3.0




Initial Training 4% 12% 23% 35% 26% 66.8%

Opening Support 6% 13% 21% 32% 28% 65.8%

Ongoing Training & Support 7% 17% 23% 30% 23% 61.3%

Field Support 12% 17% 24% 26% 21% 56.8%

Advertising & Promotion 17% 20% 24% 25% 14% 49.8%

Overall (average) 9% 16% 23% 30% 22% 60.1%

Average Rating: Training & Support

Percent Response: Training & Support

Training & Support

There are five key areas of training & support that are important to understand in any franchise system: initial training, opening support, ongoing training & support, field support and advertising & promotional programs.

Initial TrainingHow current franchise owners rate the training programs provided by their franchisor prior to opening for business.

Opening SupportHow current franchise owners rate the programs and support services provided by their franchisor during the process of opening for business.

Ongoing Training & SupportHow current franchise owners rate the ongoing training and support they receive from their franchisor in order to stay competitive.

Field SupportHow current franchise owners rate any field support and on-site services provided by their franchisor.

Advertising & Promotion How current franchise owners rate the advertising, marketing and promotional programs provided by their franchisor and how effective these programs are at developing and retaining business.

Key Findings: Training & Support

Franchisees are generally satisfied with the help they receive getting their new businesses off the ground. Both initial training and opening support commonly rate highly, with over 80% of respondents giving above average scores. When you talk to franchisees, expect to hear positive remarks in these areas.

On the other hand, once these businesses are up and running, satisfaction with ongoing training, field support and marketing and promotional programs is typically lower. These are some of the most critical areas of a franchise system that will help you be successful long-term. Be sure to question franchisees and the franchisor very directly about the services provided in these areas.



Competition 3.9

Products & Services 4.0

Innovation 3.6

Franchisee Support 3.4




Competition 3% 10% 19% 34% 34% 71.5%

Products & Services 2% 8% 17% 37% 36% 74.3%

Innovation 7% 13% 21% 31% 28% 65.0%

Franchisee Support 10% 16% 21% 29% 24% 60.3%

Overall (average) 6% 12% 19% 33% 30% 67.8%

Average Rating - Franchise System

Percent Response - Franchise System

Franchise System

There are four areas that we examine related to the franchise system itself: quality of the products & services, competitiveness, creativity and support among fellow franchisees system-wide.

CompetitionHow current franchise owners rate their franchise system’s competitiveness compared to other businesses in their local marketplace.

Products & ServicesHow current franchise owners rate the overall quality of the products and/or services provided by their franchisor.

CreativityHow current franchise owners rate the creativity of their franchise system and the openness of their franchisor to experiment with new ideas.

Franchisee SupportHow current franchise owners rate communication and support among their fellow franchisees.

Key Findings: Franchise System

It’s interesting to note that an overwhelming majority of franchise owners compare their businesses favorably to local competitors. Of course, this is a subjective measure and every entrepreneur should believe strongly that they offer the best product or service and the best value. Remember to take into account basic human nature when asking franchisees and franchisors how they perceive the competitiveness of the products and services they offer.

Franchising is often said to be a method of being in business “for yourself, but not by yourself.” Part of this advantage comes not only from the support you receive from your franchisor, but also the support and camaraderie you receive from fellow franchisees. Any good franchise system will have a strong team culture and high ratings in the area of franchisee support.




Knowledgeable & Supportive 3.9

Accessible & Responsive 4.1

Communications 3.8

Honesty & Ethics 4.4

Respect 4.1


1 2 3 4 5 strongly disagree neutral agree strongly avg disagree agree rating

strongly disagree neutral agree strongly FSI* disagree disagree

Knowledgeable & Supportive 4% 7% 18% 39% 32% 72.0%

Accessible & Responsive 2% 5% 13% 37% 43% 78.5%

Communications 4% 8% 21% 40% 27% 69.5%

Honesty & Ethics 2% 2% 10% 31% 55% 83.8%

Respect 3% 4% 15% 34% 44% 78.0%

Overall (average) 3% 5% 16% 36% 40% 77.4%

Average Rating: Relationship

Percent Response: Relationship

Relationship

Success in business is all about solid relationships. In franchising, the strength of the relationship you have with your franchisor and the home office staff plays a critical role in your long-term success as a franchise owner.

Knowledge & SupportHow current franchise owners rate their franchisor on their overall knowledge of their business and ongoing support needs.

Accessible & ResponsiveHow current franchise owners rate their franchisor’s accessibility and responsiveness to any of their questions and day-to-day challenges.

CommunicationsHow current franchise owners rate the overall communication between the corporate staff and franchise owners.

Honesty & EthicsHow current franchise owners rate their franchisor’s corporate culture and the promotion of honest and ethical business practices.

RespectHow current franchise owners rate their overall relationship with their franchisor and their level of respect for the entire franchise organization.

Key Findings: Relationship

Questions regarding the franchisee/franchisor relationship are consistently among the highest rated areas for all franchise systems, illustrating that most franchisors are honest, knowledgeable, and generally communicate well with their owners. Even when we look at the lowest performing franchise systems, those with the least satisfied franchisees (see our 2007 Worst of the Worst Report), franchisors generally receive high marks from franchisees for their honesty, business ethics and overall respect. Expect any opportunity you are researching to get high marks in these areas – if not, it is most likely a red flag for major issues within the franchise system.



Fees 3.5

Total Investment 3.5

strongly disagree neutral agree strongly FSI* disagree agree

Fees 6% 11% 25% 40% 18% 63.3%

Total Investment 7% 14% 21% 39% 19% 62.3%

Average Rating - Financial Opportunity

Percent Response - Financial Opportunity

Financial Opportunity

Most business failures are due to under-capitaliza-tion or lack of positive cash flow. Certainly, every startup business (franchise or otherwise) struggles initially and may take many months or even years to start turning a profit. In our Financial Opportunity section, we look at four critical areas of financial performance and how well the business lives up to the financial expectations of the franchisees.

FeesHow current franchise owners rate the fairness of the fees they pay, given the value of the services and support they receive.

Total InvestmentHow current franchise owners rate the total investment they have made into their business and whether it is in line with their original expectations.

Long-Term GrowthHow franchisees rate the long-term growth opportunity provided by their franchise business.

Current Financial PictureHow franchisees rate the current financial picture of their business relative to their expectations.

Key Findings: Financial Opportunity

Having a clear picture of the financial opportunity that a franchise presents is often a challenging task. Not only are there economic and market variables to consider, but risk-tolerance, availability of capital and general business smarts also play a role. On top of this, most franchisors do not provide any revenue or cost-related data and many franchisees are often unwilling to disclose personal financial information.

It’s a perfect storm of hurdles that make creating an accurate business plan daunting. Use the four indicators above as a guide. Compare how the original expectations and projections of franchisees hold up to the ac-tual business experience. Keep asking those difficult questions until you have formed your own realistic financial projections.

1 2 3 4 5 strongly disagree neutral agree strongly avg disagree agree rating

Financial Expectations 3.1**

Current Financial Picture

1 2 3 4 significantly slightly meeting exceeding avg below below rating

(percent response) 19% 28% 37% 16% 62.1%

1 2 3 4 significantly slightly meeting exceeding FSI** below below

**Current Financial Picture - It is important to note that while most of the survey questions we ask franchisees are rated on a 5 point scale, Current Financial Picture is rated on a simple 4 point scale: exceeding, meeting, slightly below or significantly below financial expectations. Because of this variance in scale on this question, the average rating and FSI are weighted slightly to reflect a 5 point scale.


Long-Term Growth 3.9

Long-Term Growth

(percent response) 3% 6% 24% 37% 30% 71.3%

1 2 3 4 5 very weak moderate strong very avg weak strong rating

very weak moderate strong very FSI* weak strong



General Satisfaction

In business, as in life, you experience many ups and downs. We all have our share of bad days, bad weeks or maybe even bad years. Franchising is no different. At any given time, a franchisee will be dealing with various challenges and issues, both personal and business-related, that effect their levels of satisfaction in certain areas. Because of this, we ask franchisees two very broad questions related to their satisfaction. Of all the questions we ask franchise owners, these two questions are clearly the most telling.

Overall OpportunityHow would you rate your franchisor and the overall opportunity provided by the franchise system?

Do It Over AgainIf you could do it all over again, knowing what you know today, would you still invest in this franchise?

Since these two questions are critical to understanding a franchise owners’ overall state of satisfaction, the General Satisfaction section is weighted more heavily when calculating the overall FSI (listed on page 3).

Key Findings: General Satisfaction

Overall, franchisee satisfaction appears to be strong throughout the franchise industry. Two thirds of franchise owners give favorable marks to the overall opportunity provided by their franchise system. Nearly half of all respondents stated emphatically that they would make the same decision again to purchase their franchise. Another 20% said they would “probably” do it all over again.

While these numbers are very positive overall, approximately one in every four franchisees would rethink their investment if given a chance. This is obviously not an alarming percentage but it does highlight the importance of finding both a good franchise company to invest in, as well as finding a franchise company that is a good fit to your specific skills and goals.

Overall Opportunity 3.7

Overall Opportunity



(percent response) 5% 13% 20% 32% 30% 67.3%

Would you still invest? 3.9

Do It Over Again

1 2 3 4 5 avg no probably not maybe probably yes rating

no probably not maybe probably yes FSI*

(percent response) 9% 9% 15% 19% 48% 72%

Overall (average) 7% 11% 18% 25% 39% 69.7%



18 - 24 years old 0%

25 - 34 years old 12%

35 - 44 years old 34%

45 - 54 years old 34%

55 - 64 years old 18%

65+ years old 2%

0% 25% 50% 75% 100%

Age GroupFranchisee Demographics

Age GroupThe breakdown of owners by age group.

EthnicityThe breakdown of franchisees by ethnicity.

GenderThe breakdown of franchisees by gender.

EducationThe breakdown of current franchise owners by highest level of education completed.

Key Findings: Franchisee Demographics

Franchisees for the most part are not a very diverse group – typically white, 40-something and male. That said, the “face of franchising” is changing, with more women, minorities and younger people entering the business daily. Don’t worry if you don’t fit the typical demographic profile of this report. Seek out franchisees that are similar to you. Their feedback could provide unique insights.

African American 2%

Asian 6%

Caucasian 87%

Hispanic 2%

Native American 0%

Other 3%

0% 25% 50% 75% 100%

Ethnicity

Female 24%

Male 76%

0% 25% 50% 75% 100%

Gender

doctorate degree - 2%

masters degree - 17%

bachelor degree - 45%

some college - 14%

high school - 22%




Single Unit / Territory 70%

2 Units / Territories 17%



5+ Units / Territories 5%

0% 25% 50% 75% 100%

Units / Territories OwnedMarket Information

Units/TerritoriesThe number of franchise units/territories owned by each franchise owner.

Additional Units/TerritoriesAsks whether or not current franchise owners are planning on purchasing additional franchise units/territories in the future. Please Note: in some systems, purchasing additional franchise units or territories may not be an option, or it may not even be necessary given the business model.

Geographic LocationThe geographic breakdown of franchise owners.

Market SizeThe market size breakdown of franchise owners.

Key Findings: Market Information

Most franchisees are single-unit operators but many systems are designed around multi-unit ownership. Be sure you find out which type ownership the franchisor recommends and that the model matches your business goals.

Seek feedback from franchisees who are serving markets and populations (ethnicity, income level, etc.) similar to the one you are looking to enter.

Planning to buy more units? 28% 16% 25% 12% 19% 44.5%

no probably maybe probably yes FSI* not

Northeast US 18%

Southeast US 20%

Midwest US 28%

South US 7%

Northwest US 7%

Southwest US 16%

Canada 4%

0% 25% 50% 75% 100%

Geographic Location

Major Metro - 31%

Large Market - 14%

Medium Market - 28%

Small Market - 16%

Very Small Market - 11%



Business Lifestyle

Franchising ExperienceLooks at the breakdown of current franchise owners by their years of experience within their system.

Work HoursLooks at the breakdown of current franchisees by the average hours they work each week.

EveningsLooks at the breakdown of franchisees by the aver-age number of evenings they are required to work.

WeekendsLooks at the breakdown of current franchise owners by the average number of weekends they are required to work.

Key Findings: Business Lifestyle

Each franchise opportunity requires a unique set of demands on its owners. For example, food and retail-based businesses will typically require their owners to work evenings and weekends, as well as manage low-skilled, low-wage employees. On the flip side, a business services franchise owner may work more traditional business hours but may be required to spend significant time networking in the local business community.

It is critical that you understand the skills and typical day-to-day tasks that are required should you choose to become a franchise owner. A good system will be up-front and clear about these requirements and the personal skills necessary to be successful.

Less than 2 years 45%

2 - 5 years 31%

6 - 9 years 11%

10+ years 13%

0% 25% 50% 75% 100%

Franchising Experience

Less than 30 hours / week 10%

30 - 40 hours / week 15%

40 - 50 hours / week 29%

50 - 60 hours / week 24%

60+ hours / week 22%

0% 25% 50% 75% 100%

Work Hours

almost always - 24%

a couple times/week - 38%

a couple times/month - 18%

almost never - 20%

almost always - 40%

a couple times/month - 34%

a couple times/year - 10%

almost never - 16%

Evenings Weekends



Yes and no.While we are widely known for our innovative franchise lead generation techniques, you may not be as aware of the consumer marketing we do. Which is odd, because we developed the breakthrough campaigns for such brands as Budget Blinds® and Edible Arrangements®. So even though we aren’t the marketing force behind the Whisk-u-la, if we were, you’d probably have three of them in your kitchen drawer.

Work with the agency that’s franfocusedSM and brandfocused. 612-341-3100 www.hotdishad.com

RUMOR#78

HOT DISH ADVERTISINGis the inventor and marketer of thewildly successful Whisk-u-la™.

Whisk with this end, spatulate with the other.

��

��

��

��

��

��

��

��

��

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � ��

��

��


About this Survey

About Franchise Business ReviewFranchise Business Review is a national franchise market research firm that performs independent surveys of franchisee satisfaction and franchise buyer experiences. Franchise Business Review’s services include commissioned franchise research projects leveraging proprietary survey processes and software, as well as industry-wide studies of franchisee satisfaction open to all North American franchise companies.

The firm administers the Franchise 50 Awards™ - an annual rating of the top franchise companies based on the highest level of overall franchisee satisfac-tion by participating companies. Franchise Business Review is headquartered in Kittery, ME and can be reached at 866-397-6680 or by visiting their com-pany websites at www.FranchiseBusinessReview.com or www.Franchise50.com.

Survey MethodologyAll active franchise owners from participating companies were invited to participate in this survey process. New franchise owners that had just joined the system and had not been in business for 3 months or longer were not included. Additionally, any franchise owners that had left the franchise system prior to the survey process were not included.

Franchise owners were made aware of the survey process by their corporate office and encouraged to participate and share their honest feedback regarding their franchise experience. Franchise Business Review then contacted each franchisee individually and supplied them with their unique login information to complete the survey. Franchise Business Review made at least three attempts to reach each franchise owner directly by email, the postal service and/or by telephone.

The standard survey consists of a total of 40 questions. The first 20 questions relate directly to the franchise owner’s experience. The remaining 20 questions are focused on market, lifestyle and personal demographic questions. Franchise owners had the option to complete the survey anonymously or choose to share their personal information.

Results represent the aggregated data from 14,695 completed surveys.

Franchisee Satisfaction Index (FSI)The FSI represents a weighted sum of responses to a question or group of questions. The weighting provides a realistic view of satisfaction ratings by favorably weighting positive responses and discounting negative responses. The formula for weighting is done by assigning the most positive response a 100% weighting and the least favorable response a 0% weighting. Values falling in between are assigned incrementally. For example a typical set of responses would have the following weighting assigned: Excellent (100%), Very Good (75%), Good (50%), Average (25%) and Poor (0%). Once the values are assigned, the FSI is calculated based on the weighted average of all responses. See page 2 of this report for more about the FSI.


Profitable franchisees are happy franchisees. Help them become more profitable – endorse ADP's solutions.

ADP brings you cost-effective and trusted services for your franchisees. Your entire system can benefitfrom our range of reliable, standardized services from a single source – saving franchisees time andmoney. Strengthen your franchise with ADP’s payroll, paycard, tax compliance, workers’ compensation,HR Help Desk, PEO, background checks, employment tax credits, and benefits administration solutions.

Getting started is simple! Contact an ADP Franchise Specialist toll-free at 866-684-7456.

This material covers only the offering of the Pay-by-Pay® feature of ADP’s payroll processing services and does not include the offer or sale of any insurance products. All insurance products will be offered and sold only through licensed agents of Automatic Data Processing Insurance Agency, Inc. or its licensed insurance partners. Clients must be using ADP’s tax filing service in order to use the Pay-by-Pay program.

© 2007 ADP, Inc. The ADP Logo is a registered trademark of ADP of North America, Inc. Pay-by-Pay is a registered trademark of ADP, Inc.

Payroll, tax compliance and HR expertise for your franchise.

franchisee satisfaction studythaifranchisedownload.com/dl/fbr-industryreport.pdf · areas of...

Documents