The Top 10%, or Healthiest, franchise systems in the industry had a 5-year average Franchisee Turnover Rate (FTR) of 8.4% while the Bottom 10%, Unhealthiest, almost doubled that FTR with 16.1%.
Part two of our 5-Year Comparison of the Healthiest and Unhealthiest Franchise Systems in Franchising presents Franchisee Turnover Rates. As introduced in Part One, the Top 10% of franchise systems opened a total of 76,161 outlets and closed only 23,990 during the 5-year period. The Bottom 10% of franchise systems opened 34,171 outlets and closed 71,290 outlets.
Identifying what categories the majority of turnover is attributable to can help to identify a franchise systems overall health. The percentage of turnover of the Top 10% and Bottom 10% of the franchise industry are broken down into the following categories:
All of the categories are equally important to note, however, the percentage of turnover attributable to Transfers highlights the difference between the Top and Bottom 10% as a result of our comparison. The Top 10% of franchise systems attributed 46.5% of turnover to Transfers over the 5-year period, while the Bottom 10% of franchise systems attributed only 20.8% to Transfers. The Bottom 10% attributed 30.4% of total turnover to terminations and 34.4% to ceased operations, while the Top 10% attributed only 20.2% to terminations and 23.3% to ceased operations.
When it comes to franchising, Murphy’s Law comes into play more often than desired. In many cases, a new franchise takes off slower than anticipated.
The emphasis on franchise system growth is as old as franchising, having been accepted as the indicator of a quality franchise.
After owning 4 successful businesses, in different business sectors, there are two common attributes my good hires have shared; Curiosity and Tenacity.
In the franchise industry, franchisors can view comparisons and relationships between consumer satisfaction for the products or services a franchise offers.
These traits lead to low franchisee turnover, an attractive investment opportunity, outlet growth and brand recognition and consumer satisfaction.
Owning a business is hard. Each venture has its differences – different customers, different go-to-market strategies, different business partners.