Research conducted by Griffith University is uncovering the key to franchising success, with franchisors invited to partake in the next round of data collection.
According to Lead Researcher Professor Lorelle Frazer, the research is the first time financial data on a range of franchising metrics has been collected, analysed and made available to the sector. It identifies sector averages and averages for the top 20 percent of franchises across more than 60 performance indicators.
“The report provides analysis of individual key performance indicators and best practice observations, as well as observations of the franchise sector as a whole.”
The ‘Franchise Performance Metrics Report 2011’ shows that although the sector experienced growth overall in 2010, a quarter of franchises in the same experienced a decline in the number of franchise units, with an average of four unit losses or five percent of franchise group size.
The retail non-food sector experienced the greatest losses, whilst retail food was the strongest with no reported declines
Report Co-Author and Avatar Consulting Director David Campbell said the research also suggests local franchise systems may not be achieving optimal or even sustainable growth rates.
“The data suggests many franchise systems aren’t hitting optimal ‘spool rate’ of franchise unit growth levels early on, leading to slow, and in some cases unsustainable long term growth.”
“Franchisors have on average five franchise units per year of operation, while the low quintile only have an average of just under one per year, which is unlikely to provide levels of capital required to fund sustainable growth.”
The Report also provides averages for young, emerging and mature franchise systems as well as for small, medium and large systems in some sections.
Individual metrics are provided for a range of areas, including franchisee reporting and compliance, franchisor financial performance, franchisee performance, royalties, franchisor executive structure and remuneration, franchisor net revenue per franchisee, franchise renewals, start-up costs, and more.
One example is the ratio of field support personnel to franchisees, which is reported as an average of one full-time field support staff member to every 22 franchisees. Average support costs per franchise unit are also included in the report.
“Franchisors can now use this data to make more informed business decisions and better allocate resources, as well as see how they’re really performing against sector averages, as well as the top franchises,” Professor Frazer added
