Survey suggests franchisors must increase franchisee support, tweak models for patchy economy

Franchises should ensure constant communication with their franchisees and start tweaking their models to account for a more frugal and lifestyle-conscious customer in order to make the most of a harsher trading environment in areas such as retail, one expert has warned.

Ian Krawitz, head of consultancy at 10 Thousand Feet, has just released the company’s annual list of the top 10 performing franchises in the country.

He says the survey, which is based off the contributions of actual franchisees, reveals some interesting lessons for business owners.

“The survey has been interesting given retail has had some slightly softer conditions. That’s been an impact on retailers, but like any market you can have some businesses performing well.”

“Surviving is a combination of factors. Support is extremely important, consistently seeing your franchisees and talking to them face-to-face, but also elements of the model as well need to be attractive to people.”

Mortgage brokerage franchise Smartline has taken out the top spot, while shoe repair and key cutting franchise Master Minit has risen from fifth place in last year’s awards to second place. Mortgage Choice took third place, followed by Mr Rental, Mrs Fields and new entry Kwik Copy.

Signwave, Anytime Fitness and Snap-on Tools took seventh, eighth and ninth respectively, while second-hand gaming franchise GameTraders took 10th.

Krawitz says it is the concept of value that has allowed many franchises, including second-hand focused franchise GameTraders, to become so successful during the past year.

Value and flexibility are two of the biggest factors the most successful franchises take into account when setting prices and developing new models, he says.

“One of the interesting ones is AnyTime Fitness. It’s a gym concept, but it’s open 24/7 and caters for those people who are time poor. They’ve grown to over 70 locations and it seems customers really respond to that.”

“The approach is less around personal training and more around trying to keep the cost down as a key part of their model. The cost for being a member is lower, and you’ve got access for longer. It’s a value proposition.”

Krawitz also points to the Mr Rental model, which rents out appliances such as televisions and refrigerators to customers.

“But their model is slightly different from other models, such as Radio Rentals. Mr Rental allows you to replace the goods once they become older, providing that value proposition once again.”

This type of model, he says, encourages more recurring revenue and will make life easier for franchisees.

“The lifestyle and financial aspects of the business line up together, and those businesses that have repeat business or revenue are able to do better. Smartline, Mortgage Choice and Mr Rental are all on a recurring revenue type of model which allows for a good balance.”

“That certainly helps franchisees become more confident about the business.”

There have been a few hiccups in the franchising sector during the past year. Souvlaki Hut – which once took out the top spot on the 10 Thousand Feet List – collapsed in December. Krawitz says the incident serves as a good lesson for new franchises – don’t grow too fast.

“Souvlaki Hut was doing well at the beginning and then after 12 months dropped out. And I think the lesson there is that you can have a really big focus on growth and that can hinder you.”

“My take on that situation was they grew the number of stores and focused on the supply of new stores and not necessarily the continuing support of those franchisees.”

The concept of franchisee support is a popular one in the list. Krawitz says the top businesses are doing all they can to ensure their franchisees ensure enough support – including making sure they receive important notices.

He points to GameTraders, which instructed its staff to reduce the number of emails being sent to franchisees with important information and instead increase the number of phone calls.

“We’ve taken on that lesson ourselves here, and whenever there is a face-to-face meeting with a client, even if we go over stuff that we sent in emails we’ll make sure we reinforce whatever is being said.”

“We recorded an increased rate of franchisee satisfaction as a result of it. I think that’s a good lesson for franchises. If you don’t keep in constant contact, then the communication can break down.”