Monday, August 16, 2010

Critical Support Areas for New Franchisees

We are experiencing a dramatic increase in individuals reaching retirement age. As with other parts of the economy, it is our expectation that some segments of franchising will undergo dramatic changes as more people contemplate retirement. While some of these individuals may choose franchising as a second career, it is more likely that the franchise industry will need to embark on a major recruitment drive to attract younger blood to the industry.

My July article noted that 15% of respondents anticipate no longer owning their franchise in five years time simply due to anticipated retirement. Another 71% of respondents anticipated doing something different in five years time. Regardless of the reason, an infusion of new franchisees will be a necessity simply to maintain the current infrastructure and revenues. Anything less will result in a contraction for affected companies within the industry. To prevent such a contraction within a specific franchise, there needs to be a focus on services most important to attracting and supporting newer franchisees.

Support requirements for new franchisees can be quite different than what is required by their more seasoned counterparts. More specifically, newer franchisees tend to require more (initial) training as they learn their new business. New franchisees rely on franchise newsletters to learn about industry best practices. They are learning new, and often proprietary, computer software. And they are cost conscious after investing significant sums of money to open a new business.

FranchiseFact’s National Franchisee Survey incorporates aspects of franchisee support that we feel are most important to newer franchisees. Specifically, the survey asks respondents to state their agreement or disagreement with statements about the support they receive from their franchisor. Franchisee responses to these statements help us to understand how franchisor support is perceived by franchisees. The accompanying table highlights preliminary (mid survey) findings that we feel are most important to the new franchisee.

Click to view accompanying table.

What we found is that just 55% of respondents report receiving access to training manuals or tutorials. This does not mean that 45% of respondents do not receive training. It does mean that training may be less formal, possibly limited to verbal instruction, and most likely lacking in resources for future reference.

Generally, we found that franchisees are dissatisfied with the type of support that we feel is most important to the new franchisee. Only 14% of respondents report that their franchise newsletter is a useful informational resource while 56% strongly disagree with the same statement. Overall, 21% of respondents feel that they received any form of training that helped them to be successful. Technology services are considered adequate by 27% of respondents and vendor programs are considered useful by 17% of respondents.

Franchisee support can vary widely among franchisors as can the fees paid by franchisees for this support. Franchisees paying higher fees are more likely to expect a greater level of support. Those who pay lower fees are more likely entitled to and receive lower levels of support. Regardless, lower levels of satisfaction with the support that is being provided is an indicator that some change is warranted.

As franchisors determine their need to recruit new franchisees to replace those leaving their system, it is the above mentioned areas that we feel will need to be addressed to best support these new business owners.

FranchiseFacts – Capturing the franchise experience

Perry Shoom, FranchiseFacts
Capturing the franchise experience!

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

Understanding the Franchise Experience blog can be found at

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