Demographically Franchisors tend to be predominantly middle aged and male, although the past few years saw a shift towards more female franchisors.

Transcription

1 Franchisors Demographically Franchisors tend to be predominantly middle aged and male, although the past few years saw a shift towards more female franchisors.

2 Sectors According to our report, business franchises are the most common at the moment. Our research has shown this to be partly due to the ease of setting them up, but also due to the need to meet a demand from propfessionals made redundant due to the recession. The more more traditional and generic food, cleaning and retail franchises make up the next most popular group. Interestingly it seems to shows a possible disconnect between franchisors and prospective franchisees; according to our prospective franchisee survey, the most popular franchises they are looking to buy are food related, which is not as highly represented here.

3 Undoubtedly quality is a bigger factor for franchisors than quantity of leads. This message is repeated throughout the survey by franchisors, and explains franchisors preference for online and targeted advertising rather than broad print/national advertising. Generally franchisors responded that the process of selling each franchise is fairly quick, in particular when we drilled down we noticed that business, services and home based franchises made up much of the 1-3 months group, while other types of franchise tended to take longer to complete a sale.

4 Overall most franchises will convert after enquiries. In this instance there was less of a divide between the business/service type franchises and other more complex ones. The number of franchisors required to convert into a sale seems to be based more on the individual franchise than the franchise type.

5 Advertising Franchisors are still advertising in a very broad range of media, with only radio advertising being very infrequently used. Surprisingly trade publications are used less than national press. Equally surprising is the internet s dominance over exhibitions when it comes to actual enquiries. Exhibitions are used by over 80% of franchisors, but currently no franchisor according to our survey would risk not advertising online. Certainly online channels deliver the volume to franchisors, and for 60% of franchisors also deliver the majority of actuial sales, though the chart below shows some franchisors still feel offline channels have their own unique purpose, and can deliver franchisee that perhaps the opnline channels can t reach.

6

7

8 When we asked which were the best sources of leads for them the web was by far and away the best source for leads, and in particular franchise sales sites, which over 60% of franchisors delivered most leads. Though this dropped down to 36% when asked which was the best source of sales. Best source of leads Best source of sales Franchise Sales sites google own site nat advertising Franchise sales websites own site google Print media exhibitions Expos Second best source of leads Second best source of sales Franchise Sales sites own site Franchise sales websites own site nat advertising exhibitions referrals Trade pubs Print media Expos Referrals direct mail Third best source of leads Third best source of sales Franchise Sales sites Franchise sales websites own site exhibitions direct mktng own site Print media Expos referrals broker

9 Lagely franchisors are very happy with franchise recruitment websites like FranchiseSales.com. While there is a feeling by some franchisors that the quality of leads could be better, there is also recognition that the reasonably low costs of such sites outweighs this. Comments included: Relatively inexpensive v exhibitions and print media. Steady flow of enquiries through the year. Downside is that unlike exhibitions, time is spent in qualifying.

10 Whilst franchisors may have some reservations about online advertising, the money they are spending makes it clear in no uncertain terms where they think the market is headed. Over 60% of franchisors plan to spend at least a third of their media budget online. Franchisors are certainly seeing their businesses in a glass half full way, with 0ver 85% saying they are doing as well as or better than they had expected. Reading the reasons franchisors gave shows the franchising sector to be a lot more resilient than others, and in fact potentially a net beneficiary from the recession. Franchisors generally report more enquiries than usual, and even though a lot of these are of poorer quality in accordance with franchisors, it is still translating into increased sales of franchises. In particular business franchisors were positive, owing to what they felt were redundancies in the professional services sectors, as were well known brands, who benefited from a flight to quality and safety from franchisees. This sentiment corresponds with the the franchisees we surveyed, who also felt now was a good time to start a franchise. Comments included: Strong Brand - Strong Sector Because we have a unique business to sell

11 Many professionals having to seek a career change due to the recession and selecting an executive franchise. We asked franchisors what was their objective for franchisee recruitment in 2010? Most franchisor s (64%) had specific targets for the number of new franchisees they will be looking to sign up ranging from just 2 or three to over 50. Of these franchisors, the most common target (for around half of them -36 %of the total) was to recruit between 10 and 20 franchisees this year. Other targets set by franchisors included: Selling more master franchises Getting 100% coverage in specific territories or countries International expansion Again, franchisors remain catagorically upbeat about their prospects for the coming year, with business franchise owners beliving further job cuts in professional services will encourage more enquiries.

12 Overall it is belief in their brand that gives franchisors confidence in their future plans. Around 50% of respondants mentioned their brand or their marketing as the main underlying reason for believing they will meet their targets. Other reasons given included: better targeting and use of new channels.

13 Of those franchisors who stated they were unhappy with franchising their business, the main complaints were lack of leads, low conversion of leads, and particulalry a feeling that the franchisees themselves were not up to the job. However for the majority of franchisors, the experience has been a very positive one. We asked our participants which sectors they believed will see the strongest and weakest growth this year. The range of answers was very wide, with 48% saying the strongest growth would come from service / business franchises, with property and IT franchises particulalry popular. Next were food and fast food franchises, with around 25%, other catgeries were work from home franchises, senior care and cleaning. The reasons given were: government incentives growing use of technoogy leading to the ability to work from home property services the need to start building again a need for business services - More professionals and women-at-home seeking opportunities. As far as the weakest sectors: These were much more fragmented, with little consensus from franchisors as to which which sectors would fare worst, but property and financial services

14 franchises were flagged up by the most respondants 18% for property - though mostly they referred to Estate Agent or franchises doing badly, and 17 % for financial services and Mortgage franchises. Other areas mentioned were cleaning and Motor Industry. Master Franchising International expansion is definitely on the cards for many franchisors, and mostly they are planning on developing their franchise further into Europe, though the Middle East and the USA are also popular options for some franchisors. When we asked when they see this expansion taking place, most franchisors said they plan to start very soon. Over 80% said it would start within the next 6-12 months, and only 16% expecting it to happen after 2 years.

15 What are the challenges facing the franchising industry? Overall, the issues franchisors feel are affecting their industry seem to be largely unrelated to the recession, and are more the type of long-standing issues many will recognis, however, there are some concerns about raising finance. Mostly franchisors are concerned about either the quality of franchisees, or the saturation of the marketplace in turn leading to negative stereotypes arouynd franchising in general. Examples of answers: Becoming very fragmented Avoiding the desire to grow where the market is already well served - saturation in a shrinking market as disposable income for most is shrinking Increasing competition in some sectors and the ability to differentiate what you do. Too many options in one sector and people won't take the time to explore them fully. Setting realistic expectations and providing ongoing growth opportunities for franchisees Getting the message across to people who are considering starting their own business that franchising is a safer route to go.

16 Awareness Finance, confidence to enter a recession hit market Been so much rubbish oversold for years, people have lost faith in buying low end franchises Recruiting franchisees of the correct calibre Too many people trying to franchise their business and diluting the potential of the others. Quality of prospective franchisees Franchising is not as well known as it should be after 30 years of trying to put the message across. As a result many people who might go for self-employment are unaware of the outstanding opportunity which exists. The marketplace for potential franchisees suffers as a consquence.