Tuesday, May 4, 2010

Women in Franchising – Better Educated, Risk Averse

Are women who own franchised businesses more or less successful than their male counterparts?

A recent NPR news item informed that women earn $0.77 for every dollar earned by men. That same day, an unrelated newspaper article described how women have a greater aversion to risk than men.

Li-Jun Ji, a professor at Queen’s University in Kingston Ontario, studies how decisions are made. According to Ms. Ji, men are “natural risk takers.” She suggests that “women tend not to get the same kick out of taking risks.”

“When it comes to a risky situation which usually involves some kind of uncertainty, women tend to perceive negative consequences to be more likely and perceive negative consequences to be more severe.”

Li-Jun Ji, professor, Queen’s University, Kingston, ON
Globe and Mail, April 24, 2010

Franchising, a risky business venture, falls into this category where Ms. Li suggests that women are more likely to “perceive negative consequences to be more severe.” Does this impact on those likely to get involved in franchising, and their relative success? Preliminary data from FranchiseFacts’ National Franchisee Survey (currently underway) was used to develop profiles for men and women who own a franchise.

Women, when opening a franchise, report as being more educated than their male counterparts but lacking a comparable level of prior business experience. These women are more likely than men to open their franchised business in a smaller population center (under 250,000 people) that is rural or suburban.

As franchisees, the vast majority (61%) of these women have owned their business for no more than four years whereas 70% of men have owned their franchised business for more than five years. Women also work fewer hours in their business.

(46% of respondents)
(54% of respondents)
Age 40-64 yrs -- 82% 40-64 yrs -- 78%
Education College/University or Higher - 84%
High School - 0%
College/University or Higher - 81%
High School - 4%
Years to Profitability Not yet profitable - 89% Under 1 yr - 25%
1-3 yrs - 27%
Not yet profitable - 25%
Prior Business Experience None - 11%
Bus Exp / No Mgmnt exp - 27%
Middle Management -
Upper Management - 23%
None - 8%
Bus Exp / No Mgmnt exp - 14%
Middle Management -
Upper Management - 39%
Years in Operation 1-4 yrs - 61%
5-10 yrs - 25%
10+ yrs - 9%
1-4 yrs - 29%
5-10 yrs - 41%
10+ yrs - 29%
Hours Worked Under 40 hrs/week - 18%
45+ hrs/week - 75%
Under 40 hrs/week - 10%
45+ hrs/week - 78%
Meeting Financial Expectations Meeting Expectations - 7%
Below Expectations - 93%
Meeting Expectations - 15%
Below Expectations - 77%
Investment of Money/Time greater than expected Agree - 57% Agree - 56%
Optimistic about long term growth of the business Agree - 11% Agree - 33%
My operation is superior to the local competition Agree - 52% Agree - 78%
Profitability Unprofitable - 81% Unprofitable - 31%
Local Population Small centers (under 250k) - 68% Large centers (250k+) - 66%
Density Urban - 32%
Suburban - 55%
Rural - 14%
Urban - 39%
Suburban - 51%
Rural - 10%

Women report as having a different perception of their business as compared to their male counterparts. Women are more likely to feel that their business does not meet their own financial expectations. They are also less optimistic about the long term growth potential of their business. Finally, women participating in the survey are less likely to believe that their own business is superior to that of their competition.

Being more risk averse, one might expect women to incur less debt and have lower business expenses. They would also be less likely to gamble on future growth. In a poor economy, these actions should result in a mitigation of business losses and possibly higher profits. The data I’ve reviewed suggests otherwise. More than 81% of women report that their business is not yet profitable, as compared with 31% of men. Possibly related to this, 61% of female respondents owned their business for less than four years. Their male counterparts report operating their business for a much longer period of time. Perhaps women entered franchising much later in the business cycle and, consequently, far more of them had not yet achieved profitability by 2009. If correct, one would expect the above statistics to look more favorable for women in 2011 and beyond.

The responses we’ve received to date from the National Franchisee Survey do suggest that Ms. Ji’s findings are consistent with what occurs in franchising if one considers some of the demographic results. Smaller population centers, and rural and suburban areas, are usually less costly areas to open a business and are more consistent with an aversion to risk. As more data becomes available, and covering more years, I hope to revisit this topic and rebuild the above profiles.

FranchiseFacts – Capturing the franchise experience

Perry Shoom, FranchiseFacts
Capturing the franchise experience!

Franchisee Survey in progress at www.FranchiseFactsUSA.com
If you are a franchise owner or store manager, please participate!

Understanding the Franchise Experience blog can be found at franchisefactsusa.blogspot.com

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