Griffith University Identifies Indicators of Franchise Success

The Griffith University’s Asia-Pacific Centre for Franchising Excellence has identified the key factors toward a Franchises’ financial success.

The recently released Franchise Performance Metrics Report 2011 identified sector averages, as well as averages for the top 20% of franchises, and low 20%, across more than 60 key performance indicators.

“The Franchise Performance Metrics Report 2011 provides new insights into true franchise performance,” says Centre Director and Lead Researcher, Professor Lorelle Frazer.

“The report provides analysis of individual key performance indicators and best practice observations, as well as observations of the franchise sector as a whole.”
Frazer says the report was the first time a range of financial data, from franchising metrics, had been collected, analysed and made available to the industry.

The research showed that although the sector experienced overall growth in 2010, a quarter of franchises experienced a decline in the number of franchisee units, with an average of four unit loses or 5% of franchise group size.

According to David Campbell, report co-author and Avatar Consulting Director, the research also suggests the Australian franchise systems may not be achieving optimal or sustainable growth rates.

“The data suggests many franchise systems aren’t hitting optimal ‘spool rate’ of franchise unit growth levels early on, leading to slow, and in some cases unsustainable long term growth,” says David Campbell.

“Franchisors have on average five franchise units per year of operation, while the low quintile only have an average of just under one per year, which is unlikely to provide levels of capital required to fund sustainable growth.”

The Franchise Performance Metrics Report 2011 also provided averages for young, emerging and mature franchise systems, as well as averages for small, medium and large systems in some sections.

All the collected data are showcased in a range of areas including franchisee reporting and compliance, franchisor financial performance, franchisee performance, royalties, franchisor executive structure and remuneration, franchisor net revenue per franchisee, franchise renewals and start-up costs.

“Franchisors can now use this data to make more informed business decisions and better allocate resources, as well as see how they’re really performing against sector averages, as well as the top franchises,” says Professor Frazer.

The Franchise Performance Metrics Report 2011, conducted by Griffith University, is based on data from nearly 70 franchise systems and represents 9,000 franchisees.