Franchisee Satisfaction Study: 2007 Industry Benchmark Report

franchisee satisfaction study
2007 industry benchmark report
2007 Franchise Business Review. All Rights Reserved.
Satisfaction is Everything
Once 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, nancial opportunity, market demographics, business lifestyle and general satisfaction with their businesses. And we dont 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 nal decision. Franchise Business Review is proud of the months of the work that went into creating this report and we hope that you nd 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 specic franchise system, visit us at FranchiseBusinessReview.com or call us at 866-397-6680. Happy Franchising! Eric Stites Founder and President Franchise Business Review
TA B L E O F C O N T E N T S
SURVEY RESULTS
Overall Satisfaction ........................................3 Training & Support .........................................4 Franchise System ...........................................5 Franchisor Relationship .................................6 Financial Opportunity .....................................7 General Satisfaction.......................................8 SURVEY METHODOLOGY ...................................... 13 ABOUT FRANCHISE BUSINESS REVIEW ............... 13
DEMOGRAPHICS
Franchisee Demographics ............................... 9 Market Information ........................................ 10 Business Lifestyle .......................................... 11
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May 2007 | Franchise Business Review 1
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Sharing the franchise experience
TM
(fsi)
The Benchmark of Franchisee Satisfaction
The 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 ve 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 industrys 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 ve areas of franchisee satisfaction included in the FSI are:
Understanding FSI FSI can range from 0 to 100% and represents a weighted sum of positive responses to a specic 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 specic 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.
Training & Support

Business 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.
Systems
Proven 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.
Relationship
Building 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 Opportunity
While the long-term nancial 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 nancial opportunity that a business generates is a primary driver to overall franchisee satisfaction.
General Satisfaction
General 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?
Franchise Business Review | May 2007
www.FranchiseBusinessReview.com
Average Rating: Overall Satisfaction Snapshot

1 poor 2 average 3 good 4 very good 5 excellent avg rating
Overall Satisfaction
Each of the ve 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.
Training & Support System Relationship Financial Opportunity General Satisfaction Overall (average)
3.4 3.7 4.1 3.5 3.8 3.7
Key Findings: Overall Satisfaction
Percent Response: Overall Satisfaction Snapshot

poor average good very good excellent FSI*
Training & Support System Relationship Financial Opportunity General Satisfaction Overall (average)
9% 6% 3% 5% 7% 7%
16% 12% 5% 10% 11% 12%
23% 19% 16% 23% 18% 20%
30% 33% 36% 39% 25% 30%
22% 30% 40% 23% 39% 31%
60.1% 67.8% 77.4% 64.7% 69.6% 67.9%
The results of this study reveal that on the whole, franchisees are satised with their franchise business and the companies they have invested in. It is worth noting however that a signicant minority expressed some dissatisfaction. Even the best franchise systems have some dissatised franchisees among their ranks. This is completely normal and you should not necessarily be concerned about a little negative feedback. That said, listen very carefully to these franchisees and try to identify their specic issues, and address these directly with other franchisees and the franchisor. Every franchise is unique with different requirements, responsibilities and opportunities. 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.
*FSI - See Franchisee Satisfaction Index on page 2
May 2007 | Franchise Business Review
Training & Support

There are ve key areas of training & support that are important to understand in any franchise system: initial training, opening support, ongoing training & support, eld support and advertising & promotional programs.
Average Rating: Training & Support

Initial Training Opening Support Ongoing Training & Support Field Support Advertising & Promotion Overall (average)
3.7 3.6 3.5 3.3 3.0 3.4
Initial Training
How current franchise owners rate the training programs provided by their franchisor prior to opening for business.
Opening Support
How current franchise owners rate the programs and support services provided by their franchisor during the process of opening for business.
Ongoing Training & Support

How current franchise owners rate the ongoing training and support they receive from their franchisor in order to stay competitive.
Percent Response: Training & Support

Field Support
How current franchise owners rate any eld support and on-site services provided by their franchisor.
Initial Training Opening Support Ongoing Training & Support Field Support Advertising & Promotion Overall (average)
4% 6% 7% 12% 17% 9%
12% 13% 17% 17% 20% 16%
23% 21% 23% 24% 24% 23%
35% 32% 30% 26% 25% 30%
26% 28% 23% 21% 14% 22%
66.8% 65.8% 61.3% 56.8% 49.8% 60.1%
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 satised 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, eld 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.
Average Rating - 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.
Competition Products & Services Innovation Franchisee Support Overall (average)
3.9 4.0 3.6 3.4 3.7
Competition
How current franchise owners rate their franchise systems competitiveness compared to other businesses in their local marketplace.
Products & Services

How current franchise owners rate the overall quality of the products and/or services provided by their franchisor.
Percent Response - Franchise System

Creativity
19% 17% 21% 21% 19% 34% 37% 31% 29% 33% 34% 36% 28% 24% 30% 71.5% 74.3% 65.0% 60.3% 67.8% How current franchise owners rate the creativity of their franchise system and the openness of their franchisor to experiment with new ideas.
Competition Products & Services Innovation Franchisee Support Overall (average)
3% 2% 7% 10% 6%
10% 8% 13% 16% 12%
Franchisee Support
How current franchise owners rate communication and support among their fellow franchisees.
Key Findings: Franchise System

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

1 strongly disagree 2 disagree 3 neutral 4 agree 5 strongly agree avg rating
Knowledgeable & Supportive Accessible & Responsive Communications Honesty & Ethics Respect Overall (average)
3.9 4.1 3.8 4.4 4.1 4.1
Knowledge & Support

How current franchise owners rate their franchisor on their overall knowledge of their business and ongoing support needs.
Accessible & Responsive

How current franchise owners rate their franchisors accessibility and responsiveness to any of their questions and day-to-day challenges.
Communications
How current franchise owners rate the overall communication between the corporate staff and franchise owners.
Percent Response: Relationship

strongly disagree disagree neutral agree strongly disagree FSI*
Honesty & Ethics

How current franchise owners rate their franchisors corporate culture and the promotion of honest and ethical business practices.
Knowledgeable & Supportive Accessible & Responsive Communications Honesty & Ethics Respect Overall (average)
4% 2% 4% 2% 3% 3%
7% 5% 8% 2% 4% 5%
18% 13% 21% 10% 15% 16%
39% 37% 40% 31% 34% 36%
32% 43% 27% 55% 44% 40%
72.0% 78.5% 69.5% 83.8% 78.0% 77.4%
Respect
How 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 satised 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 ag for major issues within the franchise system.
Average Rating - Financial Opportunity

1 strongly disagree 2 disagree 3 neutral 4 agree 5 strongly agree avg rating
Financial Opportunity
Most business failures are due to under-capitalization or lack of positive cash ow. Certainly, every startup business (franchise or otherwise) struggles initially and may take many months or even years to start turning a prot. In our Financial Opportunity section, we look at four critical areas of nancial performance and how well the business lives up to the nancial expectations of the franchisees.
Fees Total Investment
3.5 3.5
Percent Response - Financial Opportunity

strongly disagree disagree neutral agree strongly agree FSI*
Fees
How current franchise owners rate the fairness of the fees they pay, given the value of the services and support they receive.
Fees Total Investment
6% 7%
11% 14%
25% 21%
40% 39%
18% 19%
63.3% 62.3%
Total Investment
How current franchise owners rate the total investment they have made into their business and whether it is in line with their original expectations.
Current Financial Picture

1 signicantly below 2 slightly below 3 meeting 4 exceeding avg rating
Long-Term Growth
How franchisees rate the long-term growth opportunity provided by their franchise business.
Financial Expectations
1 signicantly below 2 slightly below 3 meeting 4 exceeding
3.1**
FSI**
Current Financial Picture

How franchisees rate the current nancial picture of their business relative to their expectations.
(percent response)
19%
28%
37%
16%
62.1%
Key Findings: Financial Opportunity

Having a clear picture of the nancial 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 nancial information. Its 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 actual business experience. Keep asking those difcult questions until you have formed your own realistic nancial projections.
Long-Term Growth
1 very weak 2 weak 3 moderate 4 strong 5 very strong avg rating
Long-Term Growth
very weak weak moderate strong very strong
3.9
FSI*
(percent response)
3%
6%
24%
37%
30%
71.3%
**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 signicantly below nancial expectations. Because of this variance in scale on this question, the average rating and FSI are weighted slightly to reect a 5 point scale. *FSI - See Franchisee Satisfaction Index on page 2
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 Opportunity
Overall Opportunity
poor average good very good excellent
3.7
FSI*
(percent response)
5%
13%
20%
32%
30%
67.3%
Do It Over Again
1 no 2 3 probably not maybe 4 probably 5 yes avg rating
Overall Opportunity
How would you rate your franchisor and the overall opportunity provided by the franchise system? Would you still invest?
Do It Over Again
If 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).
3.9
no probably not maybe probably yes FSI*
(percent response) Overall (average)
9% 7%
9% 11%
15% 18%
19% 25%
48% 39%
72% 69.7%
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 nding both a good franchise company to invest in, as well as nding a franchise company that is a good t to your specic skills and goals.
Age Group
0% 25% 50% 75% 100%
Franchisee Demographics
Age Group
18 - 24 years old 25 - 34 years old 35 - 44 years old 45 - 54 years old 55 - 64 years old 65+ years old
0% 12% 34% 34% 18% 2%
The breakdown of owners by age group.
Ethnicity
The breakdown of franchisees by ethnicity.
Gender
The breakdown of franchisees by gender.
Education
The breakdown of current franchise owners by highest level of education completed.
Ethnicity
0% 25% 50% 75% 100%
African American Asian Caucasian Hispanic Native American Other
2% 6% 87% 2% 0%
bachelor degree - 45% doctorate degree - 2% masters degree - 17%
3%
some college - 14%
Gender
0% 25% 50% 75% 100%
high school - 22%
Key Findings: Franchisee Demographics

24% 76% 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. Dont worry if you dont t the typical demographic prole of this report. Seek out franchisees that are similar to you. Their feedback could provide unique insights.
Female Male
Market Information
Units/Territories
The number of franchise units/territories owned by each franchise owner.
Units / Territories Owned

0% 25% 50% 75% 100%
Single Unit / Territory 2 Units / Territories 3 Units / Territories 4 Units / Territories 5+ Units / Territories
no probably not maybe probably yes
70% 17% 6% 2% 5%
FSI*
Additional Units/Territories
Asks 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 Location
The geographic breakdown of franchise owners.
Market Size
The market size breakdown of franchise owners.
Planning to buy more units?
28%
16%
25%
12%
19%
44.5%
Geographic Location
0% 25% 50% 75% 100%
Northeast US Southeast US Midwest US South US

Major Metro - 31% Large Market - 14% Medium Market - 28% Small Market - 16% Very Small Market - 11%
18% 20% 28% 7% 7% 16% 4%
Northwest US Southwest US Canada
Key Findings: Market Information

Most franchisees are single-unit operators but many systems are designed around multi-unit ownership. Be sure you nd 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.
10 Franchise Business Review | May 2007 www.FranchiseBusinessReview.com
Franchising Experience
0% 25% 50% 75% 100%
Business Lifestyle
Franchising Experience
Less than 2 years 2 - 5 years 6 - 9 years 10+ years
45% 31% 11% 13%
Looks at the breakdown of current franchise owners by their years of experience within their system.
Work Hours
Looks at the breakdown of current franchisees by the average hours they work each week.
Evenings
Looks at the breakdown of franchisees by the average number of evenings they are required to work.
Work Hours
0% 25% 50% 75% 100%
Weekends
Looks at the breakdown of current franchise owners by the average number of weekends they are required to work. 10% 15% 29% 24% 22%
Less than 30 hours / week 30 - 40 hours / week 40 - 50 hours / week 50 - 60 hours / week 60+ hours / week
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 ip side, a business services franchise owner may work more traditional business hours but may be required to spend signicant 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.
Evenings
Weekends
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%
11
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Survey Methodology
All 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 ofce 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 rst 20 questions relate directly to the franchise owners 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.
About this Survey

About Franchise Business Review
Franchise Business Review is a national franchise market research rm that performs independent surveys of franchisee satisfaction and franchise buyer experiences. Franchise Business Reviews 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 rm administers the Franchise 50 Awards - an annual rating of the top franchise companies based on the highest level of overall franchisee satisfaction by participating companies. Franchise Business Review is headquartered in Kittery, ME and can be reached at 866-397-6680 or by visiting their company websites at www.FranchiseBusinessReview. com or www.Franchise50.com.
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.
13
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2007 industry benchmark report