While a recent research report of franchisees found that 31% joined a franchise in order to enjoy a better lifestyle, Franchise Advisory Centre research indicates that after joining a franchise, income becomes more important to franchisees and is cited as the single-largest reason for leaving.

The 2007 research “Why do Franchisees Come and Go” by the Franchise Advisory Centre took the form of group interviews of master franchisees and managers of a well-known national franchise chain, and found that while lifestyle was the largest reason for joining, this was replaced by income at 45% as the largest reason for leaving a franchise system. 

Lifestyle is important, but money rules

A recent research report of existing franchisees found that 31% joined a franchise in order to have more flexibility and balance in their lives. This finding is consistent with research conducted by the Franchise Advisory Centre last year which looked into reasons why franchisees join and subsequently leave franchise systems.

The 2007 research “Why do Franchisees Come and Go” by the Franchise Advisory Centre took the form of group interviews 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.

The results for “Reasons for becoming a franchisee” were as follows:

• 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.

These results are significant not just for their similarity with later research on lifestyle as being the principle reason for joining a franchise, but also for the much lower ranking given to income (the fourth biggest contributing factor) compared to its place as the second main reason for becoming a franchisee according to the later research.

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 the Franchise Advisory Centre research, “Reasons for ceasing to be a franchisee” 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 (eg. shorter hours, days off, etc) is significantly eroded by the commercial needs of the business and the owner’s growing realization 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, Franchise Advisory Centre, 2008