Franchise Update Magazine Issue IV, 2015

are fair” (60.4 FSI). 2) Training & Supdidates and franchisees, and have them port: “Marketing and promotional prodo the exercise of a 10-year financial plan grams” (58.2 FSI); and “Effective use of (assuming median performance within technology” (59.4 FSI). 3) Leadership: your system) to gain a clear and realistic “Senior management involves franchiunderstanding of their potential return sees in important decisions” (60.8 FSI). on investment. FU: What surprised you most about Prospects’ online search behaviors your findings? Stites: We found that franchisees in To better understand franchise prospects the test group reported annual pre-tax and the franchise buying process, Landincomes 8 percent lower than other franmark Interactive analyzed data from more chisees, despite being in business slightly than 40 million Internet visits since 2010 longer on average ($74,216, compared to the leading franchise portals. These with $80,479 reported by other franchiincluded Franchise.com, FranchiseOpsees across all industries). • Update your Item 19 to clearly il- portunities.com, FranchiseSolutions.com, FU: What are you seeing in the lustrate both the median gross and net FranchiseGator.com, and BusinessBroker. overall performance numbers of earnings of your entire system. Too many net. Landmark President Michael Alston franchisees? companies share only gross numbers, or said they looked for changing patterns in Stites: Looking at trend data over the massage their financial data to focus only how prospects access the Internet, how last three years, the Franchise Update test on top performers. Also, break out Item they use portals, and how the profile is group has shown slight improvement in 19 data by franchisee tenure to clearly changing among late-stage prospects who all categories year over year, improving illustrate the typical ramp-up period of contact a franchisor through a lead form. on average by 3 to 5 percent from 2013. your business and time to break-even, as FU: What are franchisors/devel- well as typical time to median unit perFU: What were the key findings opment teams doing well? formance. Great Item 19 examples in- and results of your research? Stites: The data clearly shows that the clude Wild Birds Unlimited, Fastsigns, Alston: The number of high-value brands within the test group are providing and BrightStar Care. franchise prospects has surged in the past their franchisees with strong brand lead• Review your Item 7 data to make two years. Interest in franchises requirership and are building solid franchisee- sure it depicts the true experience of the ing more than $100,000 nearly doubled franchisor relations. The overwhelming majority of franchisees. Include an allow- in that time, up 91 percent, and intermajority of franchisees enjoy operating ance for initial working capital, as well as est in $250,000-plus businesses tripled, their business, enjoy being part of their any other items that may be required to with a 201 percent increase over summer brand, and ultimately would recommend get the business off the ground. 2013. Investment interest for $50,000 to • Require all new franchisees to take $99,000 franchises also nearly doubled, their brand to other franchisee candidates. FU: Where do franchisors/devel- a full-day small business financial course with 90.4 percent growth. And prospects opment teams need improvement? as part of their initial training, and offer for opportunities under $50,000 saw steady Stites: Based on the research find- refresher courses at your annual conven- growth, with a 12.9 percent increase unings, and specifically very low ratings on tions. Understanding income statements, der $25,000, and an 8.3 percent increase questions related to financial opportunity balance sheets, cash flow, and the key fi- in the $25,000 to $49,000 segment. Reand reported annual pre-tax income, it is nancial drivers of your business model is search also showed that mobile phones clear that many of the companies in the critical to their success. are now the predominant Internet channel • Share median resale data with can- for franchise development. Smartphones test group could be doing a much better job of setting clearer and more generated 51 percent of franrealistic financial expectations chise recruitment leads this with franchisee candidates dursummer, more than twice the ing the recruitment process. share of 2013, and up from a FU: Based on the findmere 2 percent of franchise ings, what are your rec- CALLBACK RESPONSE TO WEB INQUIRY FORM leads only 5 years ago. ommendations for fran- 31% FU: Any other sur0–4 hours chisors? How can they prises in your research 26% 4–24 hours do a better job of sales/ 8% findings? Within 48 hours recruitment? Alston: We were aston4% More than 48 hours Stites: Setting clearer fi- 18% ished at what a clear picture Did not respond with a call nancial expectations with can- 13% No online inquiry form or broken form the profile data painted for didates on the front end of us. Other measures of busi the recruitment process will ness optimism show the out2015 vs. 2014 2015 2014 go a long way toward movlook improving in fits and Returned calls within 24 hours 57% 35% ing franchisee satisfaction in starts, but this willingness to 67% 33% a positive direction. These Responded with a call and email invest in higher-cost busiCalled and left the “right messaging” 44% 20% specific steps will help: nesses is a stronger show of Only 40% had video on their franchise website vs. 39% last year; not providing content how prospects want it WEBSITE RESPONSE FORM MYSTERY SHOPPING RESULTS F

Franchise Update Magazine Issue IV, 2015 | Page 47