Discerning investors who want unvarnished information about a franchise before buying often peruse blogs for franchisees’ gripes or concerns. Now, there’s another item to consult: the franchisee-satisfaction survey.
At least two firms, Franchise Research Institute and Franchise Business Review, query existing franchisees in dozens of systems on their satisfaction levels and publish the results of those polls on their Web sites. Such research – typically funded by the franchise itself – may be a telling indication of how well a franchise system is working, or whether it should be avoided. The reports can be purchased for $24.95 on Franchise Research Institute’s site but are available for free on Franchise Business Review’s if franchisors agree to post them.
Both firms survey franchisees on a confidential basis, to assure them they won’t be identified and possibly punished for expressing their true feelings. Both also seek to survey most of a system’s franchisees to verify that the opinions are representative rather than those of a few grouches.
Although the questions they ask are similar – including the crucial “would you recommend this franchise to others?” — the firms’ approaches differ. Franchise Research Institute charges the franchiser involved before undertaking the survey; Franchise Business Review collects a fee after doing the research, if the franchiser wants to see what it found.
Both firms affix stamps of approval on franchisers whose franchisees generally endorse their systems. The Franchise Research Institute awards a “world-class franchisee” seal whereas the Franchise Business Review hands out “Best of the Best” citations.
Franchise companies fund the surveys partly to use the results – if positive – to recruit new franchisees. But often, the surveys can reveals cracks in the system that’s useful information to proactive franchise managers and potential investors alike.
“Some surveys will give extremely bad news to a CEO and a company’s owners,” says Jeff Johnson, president of Franchise Research Institute in Lincoln, Neb. One common issue is a franchise system that’s rapidly growing. “That causes all kinds of concerns among franchisees,” including haphazard support from field personnel, he says. If a franchise isn’t listed on the Institute’s site, a potential franchisee should ask the franchiser whether it has been graded, and what the results were, Mr. Johnson adds.
Eric Stites, who founded Franchise Business Review and runs it out of an office in Kittery, Maine, says that occasionally a franchiser he approaches with a survey pitch will turn him down. “If they have an issue they will try to squash a survey,” he says.
While he gave out 115 awards to franchises last year, and posts some of them on his site, Mr. Stites says that 80% of the franchises operating today “are simply average or below-average business opportunities.” Fast-food restaurant and automotive-related franchises often score near the bottom in his franchise-satisfaction surveys, he adds. Even so, his site recently posted a list of 11 “top food franchises.”
“A lot of dissatisfaction in franchising comes from [franchisers] not meeting initial expectations, which are typically set during the sales process…by overly-aggressive salespeople, unfortunately,” Mr. Stites says. On the other hand, companies with the highest franchisee satisfaction scores typically “don’t oversell their systems – in many cases they undersell it — and are very selective in their recruitment process,” he says.
For their part, franchisers who get disappointing approval ratings say the surveys often guide their decision-making and can lead to better operations.
For example, when Great Harvest Bread Co. , a Dillon, Mont., bakery chain, got a significantly lower score in its Franchise Research Institute survey several years ago than it had previously, the company’s executives realized they had responded too slowly to the low-carb craze.
“We had taken the position that we sell carbohydrates for a living,” recalls company president and chief executive Mike Ferretti. “But our customers were saying, ‘We’ll go someplace else. Many of us are no longer eating what you sell.’ ” As a consequence, the chain introduced a low-carb bread that remains a popular item. “Franchisees were right about our head-in-the-sand attitude,” Mr. Ferretti says. That experience “taught us a very valuable lesson.”Mail this post