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Revealed: The surprising secrets of franchise success

feature-franchise-200The most comprehensive survey of Australian franchisees ever undertaken has uncovered exactly which franchisees are the most financially successful.

The survey of over 1,800 Australian franchisees was conducted by business psychologists at The Franchise Relationships Institute.

Each franchisee completed a 210-item questionnaire on their background, work patterns, attitudes and satisfaction with the business. Performance data was also collected independently, enabling the researchers to identify the factors driving performance and satisfaction.

The study aimed to discover why some franchisees within the same franchise system perform better than others, and to measure the current state of franchisee satisfaction in Australia and it came up with some pretty interesting results.

The study found that the franchisees that were the most profitable were generally of the same sex, had the same level of education and had similar attitudes.

According to Greg Nathan, founder of the Franchise Relationships Institute, ticking off all the right attributes can make a significant difference to the franchise bottom line.

The institute is running briefing sessions for franchisors in Brisbane on June 19, Sydney on June 21 and Melbourne on June 26. In the meantime, we’ve had an early look at the Franchise Excellence Research Report and have the low down on exactly which franchisees make the most money.

It’s a man’s world

The study found that over 60% of franchisees are men and male franchisee’s scored significantly higher than females in terms of financial achievement with a 6% higher profitability.

Female franchisees do outperform men in terms of having more harmonious franchise relationships with franchisors, but it is men who make the most money.

Too much education is a bad thing

In terms of financial performance, it turns out that franchisees can be over-educated.

The study found that just over 40% of franchisees had completed high school, over 30% had completed a university or a college degree and over 10% had completed postgraduate study.

However, the financial performance of franchisees who had been to university or completed postgraduate study was worse than those with just a high school education.

The report found that franchisees with higher education levels are more likely to ask questions and challenge the status quo, as this is what a higher education trains them to do.

This behaviour does not appear to be useful when running a small business, especially in a franchise system that will already have set operational procedures in place.

“It looks like the educated franchisees asked too many questions instead of just implementing what works,” says Nathan.

Talking the talk

Most franchise systems are bringing increasing numbers of franchisees from non-English speaking backgrounds into their networks.

Of those surveyed, only 159 franchisees or 11% indicated they had English as a second language (ESL), although Nathan says he suspects the actual percentage of ESL franchisees in the wider franchising sector is in excess of 20%.

ESL franchisees scored 9% lower on financial achievement than franchisees with English as a first language, mainly because of profit performance scores being 11% lower.

“Clearly they need more help here and the trend is going to continue, so we need to address it,” says Nathan.

Hard work does not necessarily equal success

Nathan says one of the biggest myths about franchising is that if franchisees work hard they’ll be successful.

Of those surveyed, 62% work over 40 hours a week and 12% work over 60 hours a week. The survey also found financial performance improved when franchisees worked up to 50 to 60 hours a week.

However, financial performance drops away for those who work over 60 hours per week.

“Franchisees who work harder are not making more money; rather it’s those who are working smarter that are winning,” says Nathan.

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Cara Waters

SmartCompany editor

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Cara Waters is the editor of SmartCompany. Previously, Cara was a senior reporter at the Financial Times website FT Adviser in London and she also worked for The Sunday Times in London.
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