The Internicola Law Firm, P.C.

Franchisors: Satisfied Franchisees Have Influence on Franchise Growth and Profitability

As a franchisor you have invested much time, effort and dedication into your franchise system and its profitability, but what is the key to a truly successful franchise system?

My take on the characteristics of a "successful franchise system" -  Controlled and Sustainable Growth characterized by franchisee profitability, unit growth, sustainable royalty streams and properly managed litigation exposure.

In reviewing  a recent article in the Franchise Update Magazine, the author, Steve Olson, reviews a study by Franchise Business Review (FBR) -  a company specializing in independent franchisee satisfaction reports and ratings - and points out one of the many important factors to a successful franchise system: "Franchisee Satisfaction".  While FBR may be a "franchisee advocate" with a point to prove, nevertheless, franchisors cannot ignore the fact that franchisee satisfaction / franchisee profitability is critical for a successful franchise system. 

According to the FBR study "franchisee satisfaction" boosted sales an average of 600%.  The study conducted by the FBR was done with franchise systems with a minimum of 50 franchise units. Studies show that happy franchisees create not only a better environment for existing franchisees but also creates a better opportunity for franchise growth.

If the start-up and established franchisor alike, recognition must be given to franchisee profitability and satisfaction.  Franchise agreements, operations manuals and the numerous other legal and administrative documents that govern and define a franchise relationship must be geared toward a "firm" but, nevertheless, "balanced" relationship focused on overall franchise system growth and success.