Franchisees join for lifestyle but they leave for (lack of) money

My research shows that relying on “lifestyle” to attract new franchise recruits is fraught with danger. JASON GEHRKE

By Jason Gehrke

Almost a third of franchisees joined a franchise in order to have more flexibility and balance in their lives, according to a recent research report by the Franchise Relationships Institute that surveyed existing franchisees.

This finding is consistent with research I conducted last year which looked into reasons why franchisees join and subsequently leave franchise systems. And comparison of the two studies raises an interesting point about how franchisee’s priorities change over time.

For my study, “Why do franchisees come and go” I interviewed groups of master franchisees and managers of a well-known national franchise chain. Participants were asked to assess what factors their franchisees cited as reasons for joining – as well as leaving the system – with responses grouped by recurrent themes and weighted according to the emphasis given to each.

They gave the following reasons:

• 33% for lifestyle reasons.
• 27% for access to support and the security of a brand.
• 19% for the purpose of taking charge of one’s own destiny.
• 16% to increase earning potential and income.
• 3% to learn new skills.
• 2% joined for other unspecified reasons.

So lifestyle is the principal reason for joining a franchise, and increasing income came fourth as a reason to buy a franchise – at the time of joining. By contrast, the Franchise Relationships Institute’s research, which surveyed existing franchisees, found the second most popular reason for joining a franchise was improving income.

A person who is looking at getting into business for themselves will be motivated by many things, but money it seems is not at the top of the list. However, once a person is in business, money assumes a much greater importance than it previously did, hence the elevation of income from fourth to second position across the two studies, as the second study researched people who are still operating their businesses.

The second part of my research made some significant findings as to the growing importance of income at the expense of lifestyle during the lifecycle of the franchisee. Lifestyle shrinks to just 12% of the reason for leaving, but income swells to 45% of the reason for leaving a franchise.

Other results for leaving a franchise were:

• 14% for brand security and support (or lack thereof).
• 11% for personal and family reasons (including relationship breakdowns, among others).
• 9% for other reasons (not specified).
• 6% to take charge of one’s own destiny (perhaps by recommencing a career path in employment, or striking out on one’s own as an independent operator).
• 3% discontinued for health reasons.

The reliance on lifestyle as an appeal factor in recruiting franchisees is fraught with danger.

This research suggests that lifestyle considerations in buying a franchise are based on a potentially false premise that the franchisee’s income will remain the same or even increase as a result of buying the franchise.

However the ability to enjoy a flexible lifestyle (shorter hours, days off, etc) is significantly eroded by the commercial needs of the business and the owner’s growing realisation of the amount of effort required to generate the level of income that they had potentially taken for granted.

In other words, no matter how appealing lifestyle might be in the decision to buy a franchise, money is ultimately what it’s all about.

Franchisors and franchisees who do not place adequate emphasis on income in their recruitment and business planning processes will inevitably find that both parties will become disappointed with the business relationship.

Jason Gehrke has a passion for franchising. He has been involved in the sector for 17 years as a franchisee, a franchisor, provided PR and marketing services to more than 30 leading Australian franchise systems, and presented to literally thousands of potential franchisees and franchisors over the years. He is a director of the consultancy Franchise Advisory Centre and is the immediate past CEO of automotive paint and plastic repair franchise, Kwik Fix International, a 2004 Australian Franchise System of the Year winner.

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