FBR Issue 2 - 2018

FBR SPECIAL REPORT
THE FRANCHISE TIPPING POINT
There are several hundred new companies
that start franchising every year. Many of
their owners probably have similar visions
to Ray Kroc, hoping to build the next franchise
empire. But the reality is few franchise
companies ever make it really big. In fact, the
majority of franchise opportunities available
today are with companies that are under 100
locations. That said, you don’t have to invest
in a big franchise company in order to be successful
as a franchise owner.
“Big isn’t always better,” says Eric Stites,
CEO and Founder of Franchise Business
Review. “Size certainly gives you scale, and
other advantages like higher brand awareness
and greater purchasing power. But
just because a franchise company is large, it
doesn’t automatically mean that the franchisees
are happy and successful.”
The tipping point for new and emerging
franchise companies tends be somewhere
between 50–100 units/locations. This is where
the company becomes royalty self-sufficient…
in other words, prospering on royalty revenues
paid by successful franchisees, rather
than being dependent on franchise fees from
the sale of new franchise locations.
Stites explains, “In those early days, when a
franchise company’s only significant revenue
source is new franchise fees, they can make a lot
of mistakes. The good franchise companies
quickly reinvest franchise fee income into building
the support structures necessary to grow.”
In addition to Kona and Orangetheory,
Franchise Business Review has been tracking
FEATURED
Franchisee
Sally Hanson & Roger Osborn
Our Town America
Raleigh, NC, Fort Myers and Naples, FL
Franchisee since 2015
Franchisee Satisfaction: Emerging Brands
Even though Emerging franchise systems can be considered riskier investments than more
established systems, many franchise owners have found success with these newer brands
by getting in on the ground floor. In fact, looking at franchisee satisfaction data spanning a
recent 18-month period, franchisees of Emerging brands showed a more positive sentiment
in several key areas compared to all franchise owners we’ve surveyed.
Percent of franchisees reporting positive sentiment
100%
50%
0%
74%
62%
Franchisor and
Opportunity Provided
Emerging Franchises
76%
60%
Overall Satisfaction
* Note: Based on franchise owners in business for two years or longer.
All Franchises
84%
73%
Would You Recommend
This Franchise?
What was it about the franchise model and/or
leadership that led you to purchase it? My friend
had been a successful franchisee for 10 years
and recommended Our Town America. I was
looking for a business model where I could work
from home with a flexible schedule and have few
to no employees. The company offers so much
support, from appointment setting services to
sponsor services management. We have a
wonderful corporate culture, much like a family.
What type of business experience, education,
and/or skills did you have prior to becoming
a franchisee that you have found particularly
helpful? I have a strong background in
advertising sales and management. The role is
similar to what I’ve been doing my entire career,
but now I get to do it for myself and my family.
How did you fund your franchise? Did you
receive any discounts/incentives? My husband
and business partner is a veteran so we were
able to take advantage of the $10,000 Military
discount that OTA corporate provides. We used
our savings for the franchise fee, but we were
able to pay it back and turn a profit within the
first year.
What advice do you have for prospective
franchise buyers? What do you wish you had
known prior to going into franchising? I think
it’s necessary to have a strong direct sales
background and to be able to manage time well.
It’s also important to follow the training and
guidance the company provides. You will do well
if you do.
For more information about Our Town America
opportunities, call (800) 497-8360 x236
or visit www.ourtownamerica.com.
For more information on this report, visit: www.FranchiseBusinessReview.com | 19