white paper international performance survey may 21 2013
DESCRIPTION
White Paper based on research by Franchise Mind Corporation ( #FranchiseMind ) on the performance of the franchise community internationally. www.FranchiseMind.comTRANSCRIPT
International Franchise Performance Survey White Paper May 21, 2013
© Franchise Mind Corporation. All Rights Reserved No portion of this publication may be reproduced or transmitted in any form without the explicit permission of the publisher. This publication can be cited by giving due credit to the copyright holder, Franchise Mind Corporation.
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International Franchising Performance Survey
White Paper
May 21, 2013
International Franchise Performance Survey White Paper May 21, 2013
© Franchise Mind Corporation. All Rights Reserved No portion of this publication may be reproduced or transmitted in any form without the explicit permission of the publisher. This publication can be cited by giving due credit to the copyright holder, Franchise Mind Corporation.
www.FranchiseMind.com Page 2 of 17
Introduction In international franchising, all is not well with the relationship of the Franchisor and the Master Licensee. A recent study conducted by Franchise Mind™ finds that 50% of Master Licensees say they would not acquire the master license again from the franchisor. Half the franchisors say that the performance of their Master Licensees was just ‘average’. What causes two parties who created a business relationship for the purposes of expanding a brand to not be fully enthusiastic about their results? What are the potential issues that cause this dissatisfaction? What are possible solutions? This white paper reviews this problem using qualitative data based on the perceptions of the Franchisor, Master Licensees and Consultants to show that this problem is indeed wide-‐spread. The paper also offers possible solutions as well as the Franchise Mind™ approach to create a win-‐win for all parties concerned.
Franchisors not happy with results
+ 50% of Master Licensees would 'not do it again'
Two unhappy parties! WHY?
International Franchise Performance Survey White Paper May 21, 2013
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Methods of Inquiry While conducting educational seminars across the world, Franchise Mind™ works with hundreds of Franchisors and Master Licensees. In these sessions, many of the same concerns are discussed:
• Franchisors are complaining that Master Licensees are not following the system
• Franchisors are complaining that Master Licensees are not growing fast enough
• Master Licensees are complaining that Franchisors are not supporting them and making too many changes too fast without understanding the local market
Franchise Mind™ designed and conducted the International Performance Survey of Franchisors, Master Licensees and Franchise Consultants from March-‐April 2013 to collect more substantive data. Responses were received from 13 countries and represented 9 different sectors of business. The sample size of 50 respondents comprised of the following:
While Franchise Mind™ considers the results of the survey to be good indicators in confirming its premise, scientific and/or statistical methods were not used. The data give insight into potential opportunities for improvement and expansion for all parties in the franchise eco-‐system: Franchisors, Franchise Consultants, Master Licensees and suppliers.
Franchisors (49%)
Franchise Consultants (41%)
Master Licensee (10%)
International Franchise Performance Survey White Paper May 21, 2013
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Key Data The data from the International Franchise Performance Survey have been categorized into three groups: Franchise Consultants, Master Licensees/Country Manager, and Franchisors. The key findings from each group have been highlighted.
Franchise Consultants In many international countries, Franchise Consultants are the first step in the process of international franchising. The perceptions of consultants will likely be based on the performance of their many clients or their observations of the strengths and deficiencies in the Franchisor-‐Master Licensee relationship.
Key Findings Top five challenges faced by clients that franchise internationally:
• Franchisor-‐franchisee relationship • Operational performance
• Financial performance • Leadership & management • Recruitment of franchisees
Franchise Consultants Data gathered to better understand Franchise Consultants who responded. Clients
§ 89% of consultants work exclusively with Franchisors
§ 47% work with both domestic and international clients
§ 24% work only with international clients
Services offered to clients
• 82% Strategic and management consulting
• 59% helping companies become Franchisors
• 59% SOP development
• 59% Operation manuals
International Franchise Performance Survey White Paper May 21, 2013
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Master Licensee & Country Manager We have grouped Master Licensees and Country Managers (either as an employee of the Franchisor or as an independent entity) in the same category as their experience would be similar in nature.
On the satisfaction scale of Extremely Satisfied to Not Satisfied on different criteria Master Licensees answered in following:
Support during launch
Satisfaction with business
Performance of company outlets
Performance of franchise outlets Overall growth of Master License
100% 'Somewhat Satis2ied'
to 'Satis2ied'
On going support from Franchisor
50% 'Not
Satis2ied'
Master Licensees Data gathered to better understand the background of Master Licensees who responded to the survey
§ Have been Master Licensees for 4-‐7 years
§ Affiliated with one brand only
§ Operate less than 5 company owned outlets
§ 50% have 2-‐5 franchise outlets
§ 50% have 21+ franchise outlets
International Franchise Performance Survey White Paper May 21, 2013
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50% would NOT acquire a master license from the same Franchisor
Key Findings When Master Licensees/Country Managers were asked the areas that would lead to improved performance for their outlets, respondents pointed to the following:
o Operational improvement strategy for
franchise outlets
o Mentoring & coaching for the Master Licensee from the Franchisor
When Master Licensees/Country Managers were asked the areas where Franchisor support was lacking, the following major issues are cited:
o Relationship management with franchisees
o Training to become a better Master Licensee
o New products and services specific to the market
o Franchisee recruitment strategy and support
o Customer service
Support Required
Operations
Mentoring & coaching
Support Lacking
Relationship management with franchisees
Training to be better Master Licensee
New products & services speciVic to market
Franchisee recruitment strategy & support
Customer service
International Franchise Performance Survey White Paper May 21, 2013
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0% 10% 20% 30% 40% 50%
Franchise within 1 year
Franchise within 3 years
Franchise more than 3 years
% of franchisors intending to go international
Franchisors intending to go international Franchisors intending to franchise internationally were invited to take the survey to gain insight into their perceptions of international franchising. Could these initial perceptions be a cause for future problems?
Preparations required prior to franchising internationally Franchisors were asked what preparations they needed prior to going international. The responses
0% 10% 20% 30% 40% 50% 60% 70% 80%
Strategy
Legal
Foreign regulations
Localization
Development partners
Operations
Preparation required to go international
International Franchise Performance Survey White Paper May 21, 2013
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50% of Franchisors rank Master Licensee performance as
AVERAGE
Franchisors currently with international operations
Key findings
§ 33% of Franchisors had 5 outlets in their home country
§ 33% of Franchisors had 51+ outlets in the home country.
§ 72% of Franchisors had an average of 10 outlets per country
§ 50% considered the number of outlets per country to be ‘lower than expected’
§ In ranking the performance of their Master Licensees, Franchisors said:
o 50% ‘average’
o 33% ‘above average’
o 17% ‘excellent’
§ In ranking the performance of franchisees operating under the Master Licensee, Franchisors said:
o 59% ‘Average’
o 41% ‘above average’
International Franchise Performance Survey White Paper May 21, 2013
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Top 5 challenges faced with international operations:
§ 75% Recruitment of franchisee
§ 42% supply chain issues
§ 34% performance of franchisees
§ 25% on going training of franchisees
§ 9% initial training of franchisees
50% 'Average'
33% 'Above average' 17% 'Excellent'
Master Licensee
59% 'Average'
41% 'Above average'
Franchisees
International Franchise Performance Survey White Paper May 21, 2013
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0%
10%
20%
30%
40%
50%
60%
70%
80%
Recruitment of franchisees
Supply chain Performance of franchisees
On going training franchisees
Initial training franchisees
Challenges per Franchisors
International Franchise Performance Survey White Paper May 21, 2013
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Number of employees dedicated to international operations:
Methods chosen for international franchising:
0% 20% 40% 60% 80%
Master Licensee
Direct franchising
Joint venture Country manager
Methods of international expansion
Franchisors Data gathered to better understand the background of Franchisors who responded to the survey § 58% of franchisors have been
franchising internationally for 3 years or less
§ 42% were franchising for 4 years or more
§ 67% had operations in less than 3 countries
§ 33% had operations in 4 or more
countries
§ 92% had international development done by internal staff
§ 8% had retained a consulting firm
2-‐5 employees 6-‐10 employees
0 employees 1 employee
0% 10% 20% 30% 40% 50% 60%
Employees dedicated to international operations
International Franchise Performance Survey White Paper May 21, 2013
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Conclusion From the International Franchising Performance Survey several profound conclusions can be drawn. Franchisors are focused on recruitment of franchisees as an unduly weighted measure of success. Master Licensees are seen simply as a vehicle for recruiting franchisees. What gets forgotten in this race for increasing outlets, is the development of the Master Licensee business which includes training, supporting, coaching and mentoring Master Licensees to their fullest potential. It is a problem that can be solved if there is an organizational commitment of time, money, dedicated resources and resolve on the part of the Franchisor. In essence it is a commitment to build a successful Franchisor-‐Master Licensee model. Most Franchisors will agree that the game of franchising is a game of patience, tenacity, persistence, hard work, a long-‐term view and doing many small things ‘right’. When this game moves to the international arena, the same elements are magnified multi-‐fold. As such, success in international franchising can only be achieved by addressing the disconnect between the Franchisor and Master Licensee as evidenced by 50% of Master Licensees saying, given their experience with the Franchisor, they would not be a Master Licensee again and 50% of Franchisors saying that their Master Licensee are average. We summarize the top concerns with international franchising as articulated by each of the three parties: Consultants, Master Licensees and Franchisors.
International Franchise Performance Survey White Paper May 21, 2013
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Summary of top challenges
Challenges per
Consultants
Franchisor-‐franchisee relationship
Operational performance
Financial performance
Leadership & management
Recruitment
Challenges per Master Licensees
Operational improvement strategy
Mentoring & coaching
Relationship management
Training to be better Master Licensee
New products speciVic to market
Franchisee recruitment support
Customer service
Challenges per
Franchisor
Recruitment of franchisees
Supply chain issues
Performance of franchisees
On-‐going training of franchisees
Initial training of franchisees
International Franchise Performance Survey White Paper May 21, 2013
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1. Disconnect on what it takes to be successful. Both the Franchisor and Master Licensees are on different pages in terms of what is important for the success of the business. To franchisors, recruitment is the most important for the success of the business (75%), while Master Licensees consider operational improvements strategy as the most important. This disconnect, on what each party believes it takes to be successful as a Master Licensee, sets the tone for their relationship and leads to 50% of Master Licensees saying they would ‘not do this again’. The responsibility to remove this disconnect and create a shared vision (addressing the balance between recruitment and operations) for the brand must be addressed by the Franchisor.
2. Master Licensees not satisfied with on going support. 50% of the Master Licensees say that they are ‘not satisfied’ with on going support. The evidence is clear on this: Master Licensees want training to be better Master Licensees as well as on going mentoring and coaching. Franchisors on the other hand don’t see these items as being important. As such the entire relationship will be seen through the prism of “I am not receiving the support I require in order to succeed’.
3. Performance of franchisees is ‘average’. 59% of franchisors say that franchisees operating under their Master Licensees are ‘average’ yet aside from identifying initial and ongoing training of franchisees no other items are mentioned as challenges that would solve this issue. While further examination is required to understand why training is a challenge, clues for improving the performance of franchisees may be available from what Master Licensees have listed as challenges: Operational improvement strategy, new products appropriate to the market and customer service.
4. Master Licensees want operational focus to grow brand. Looking at the
seven challenges identified by Master Licensees, we see four being operational in nature, one focused on recruitment and two focused on being a better Master Licensee. This suggests that Master Licensees believe that if operational issues are addressed first than the issue of recruiting franchisees will become easier.
International Franchise Performance Survey White Paper May 21, 2013
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5. Master Licensees want greater focus on their training to be better Master Licensees. Franchisors see the training of franchisees as important while Master Licensees do not see that as an issue but rather their own training as a challenge. This suggests that franchisors who are accustomed in their own countries on franchisee training continue to project the same thinking when going international—a continued focus on franchisee training without the realization that Master Licensees need to be trained to be a ‘Franchisor’.
6. Franchise Consultants have a clear picture. We believe that Franchise
Consultants collectively have identified the correct challenges facing international franchising and have also placed the right priorities to address those challenges.
International Franchise Performance Survey White Paper May 21, 2013
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The Franchise Mind™ approach as a solution Based on the results of the International Franchise Performance Survey, we see several confirmations for our programs, opportunities to emphasize other programs as well as new program development:
1. The Franchise Mind™ curriculum is based on the 4 Pillars to Building a Successful Franchise System. This comprehensive program is the only one of its kind which addresses the exact issues being raised by the survey by all parties. A methodical study under the guidance of an experienced franchise executive provides Franchisors with practical and essential tools for success.
© Franchise Mind Corporation
Successful Franchise System
Replicable system
Dynamic organizational
culture
Success oriented leadership
Six core areas
6 Core Areas
Creating loyal
customers
Successful franchise recruitment
Focused training & support
Franchise unit
excellence
Effective franchise
relationships
Growth oriented business & Vinancial planning
International Franchise Performance Survey White Paper May 21, 2013
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2. The Franchise Mind™ program “Going Global” should be considered by all Franchisors thinking of going international as it provides a systematic approach to prepare for the international journey ahead of taking the plunge.
3. The Franchise Mind™ program “Choosing the right master for me”, for potential Master Licensees to help them evaluate potential franchisors as well as have a clear understanding of their role as a Master Licensee thereby making them better prepared candidate for the Franchisor.
4. The Franchise Mind™ boot camp on “How to operate a successful
Master Licensee” is essential for all Master Licensees as it teaches them how to be a “Franchisor” in their Country. This boot camp covers in great detail the six core areas of the Franchise Mind™ system.
5. On going Franchise Master Mind™ program for Master Licensees
customized for each Franchisor. Through expert facilitation, Franchise Mind™ can mentor Master Licensees to operate at global standards, achieve improved operating results and accelerated growth.
We sincerely thank those that took the time to share their views by taking the survey. We commend them for their interest in improving the performance of international franchising. We hope that you have the opportunity to reflect on our conclusions but at the same time draw your own conclusions for the benefit of your own company.
Franchise Mind Corporation www.FranchiseMind.com
Questions, queries can be directed to: Mr. Harish Babla, Managing Director