It’s Closing
TIME BY STEVE OLSON
Validation: Your Most
Powerful Sales Tool
Franchisee satisfaction makes or breaks your growth
Franchisee satisfaction is a key performance benchmark for fore- casting the rate of your system
development. If your “troops” aren’t
promoting you, it doesn’t matter how
compelling and profitable your program is. I’ll never forget the children’s
franchise with a great financial success
story. Even though their business model
and ROI were terrific, their recruiting
efforts were flopping. Lack of corporate
support sparked huge issues, and owner
validation was near nonexistent.
units, with a median size of 165 units.
Median annual growth for these companies over a three-year period was 12. 5
percent. The sample was split into four
quartiles based on franchisee satisfaction,
as measured by FBR in this franchisee
The research clearly
documents that higher
satisfaction produces
greater franchise growth.
Happy franchisees
boost sales 600%
What is the relationship between franchisee satisfaction and the growth rate
of new franchisees entering franchise
organizations? Franchise sales execs know
there’s a direct connection, but is there
any documentation to prove this? To
answer this question, I asked Eric Stites,
president of Franchise Business Review
(FBR), to conduct research to find out.
FBR is a franchise marketing company
specializing in independent franchisee
satisfaction reports and ratings.
The study, based on data from 130
franchise companies, revealed that
companies with high levels of franchisee satisfaction grew at an annual rate
six times greater than that of companies with low satisfaction levels. Small
franchisors (especially start-ups) were
excluded from this survey since they
would skew the results because of much
higher year-over-year growth as a percentage, and because they had less of a
track record for measuring franchisee
satisfaction.
The 130 companies in the study had
a minimum of 50 franchise units. Systems ranged in size from 50 to 3,915
satisfaction survey. The average rate of
survey participation by franchisees was
58 percent. The research clearly documents that higher satisfaction produces
greater franchise growth.
file, you better find out fast! For starters, you can strengthen your system’s
growth opportunities by identifying the
winning characteristics of the best 20
percent in your program. Also identify
the behaviors and experience levels of
your bottom 20 percent, those owners
who “just don’t get it” and fail to improve
even with continual support and assistance. Profiling the bottom 20 percent
of your franchisees accomplishes two
objectives: 1) it alerts you to variations
in behavioral styles that are contrary to
your success model, and 2) it more clearly
distinguishes the desired characteristics
unique to your top performers.
More franchisors now use professional behavioral surveys as part of their
franchisee selection process. They have
proven a smart investment for many,
especially considering the size of the
payoffs and risks at stake. They certainly
helped with my franchise recruitment
experiences.
Survey dispels myth about
fastest-growing companies
The study also helps answer the frequent question: Do the fastest-growing
franchise companies experience lower
franchisee satisfaction? There’s an industry perception that rapid growth often
creates disgruntled franchisees because
of eroding support and services. In this
FBR study, there wasn’t any conclusive
evidence to support this. In fact, the 50
fastest-growing companies of the 130
surveyed had a median franchisee satisfaction rating slightly higher ( 3 percent) than the rest. So clearly, there are
many companies growing quickly and
still maintaining high satisfaction levels
with their franchise owners.
Winners in the new economy
Franchisors that invest in their current
franchisees’ health and satisfaction are
widening the gap from competitors
no longer able to capitalize on the
overflow of franchise prospects and
the easy loans of the 2000s. The moment the 2010 candidate begins their
validation calls and visits, the future of
their decision to pursue your franchise
lies heavily in the hands and satisfaction of your franchisees. Will most of
your brand representatives engage and
excite your prospect to continue their
investigation—or scare them away with
frustrations they could also encounter?
Invest in your franchisees and enjoy the
payoffs. They can handsomely reward
you by validating well with your prospects and actively referring more new
franchise candidates to you. n
How important is the right fit?
Franchise dissatisfaction is not only
caused by support or management concerns. Often it’s the result of awarding
franchises to the wrong people. If you
don’t know your ideal franchisee pro-
This article is an excerpt from Grow to
Greatness: How to Build a World-Class
Franchise System Faster by Steve Olson.
For ordering information, go to www.franchiseupdate.com/gtg.
