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Surveys
conducted by SPRING Singapore from February to March 1998, confirmed
that franchising is a viable business concept which can help
to improve the performance of SMEs. A total of 21 franchisors
and 104 franchisees responded to the surveys. The surveys were
to find out how franchisors and franchisees have benefited from
the process of franchising. Profile
of the Franchisors
On average, a typical franchisor had seven franchisee outlets
and eight corporate outlets. 24% of the franchisors had 10 or
more franchisee outlets. These were typically the larger establishments.
76% of the franchisors had already franchised overseas or planning
to do so. Feasibility
of Franchising
About 85% of the franchisors surveyed agreed that franchising
was a more feasible business expansion option than starting
their own outlets. This was 9% higher than that reported in
the 1997 survey and reflected the success of SPRING Singapore's
efforts in promoting franchising as a viable means for growth
and expansion. Success
of the Franchise
The results further showed that two-thirds of the franchisors
surveyed felt that their franchises were generally successful.
19% of the franchisors were unsure because their franchises
were only launched recently (less than one year old). Nevertheless,
most franchisors were upbeat about the success of their franchises
despite the current economic situation. Business
performance had also improved for the franchisors. About 83%
of franchisors enjoyed an increase in average monthly sales
since embarking on franchising. Most of the candidates registered
improvements between 1% to 10% since franchising. Through franchising,
companies could expand rapidly without relying entirely on their
own resources, and this allowed them to enjoy an increase in
income. Franchising
also enjoyed increased profitability, with about 72% reporting
an increase in monthly net profits since they started franchising.
The average improvement was between 1% to 10%. The lower capital
outlay and economies of scale attained through franchising helped
franchisors to increase sales while keeping business costs low. Reason
for Franchising
The survey also examined the reasons for franchising. Two-thirds
of them felt that economies of scale in bulk purchasing encouraged
them to consider franchising. Profile
of Franchisees
Franchisees were generally young and well educated. 62% of them
were below 40 years old. More than half of them (57%) had post-secondary
education. About half of the outlets (46%) were fully-tenanted
by franchisees and more than 32% of the franchisees owned their
own outlets. Franchising
Helps Existing Businesses Do Better
Two-thirds of the franchisees who operated existing businesses
in the same trade agreed that franchising had helped them to
do better than before. The finding showed that most franchisees
viewed franchising favourably as a means of improving their
business viability and performance compared to running their
own business. Business
Performance
Close to 80% of the franchisees experienced an improvement in
sales since converting to a franchise in the same trade. This
improvement in performance after conversion testifies that the
use of a well-known brand name through franchising can help
to attract customers and generate increased revenue. Franchising
also helps to improve the bottom-line of franchisees. About
72% of surveyed franchisees experienced improved profitability
compared to running their own business in the same trade. The
improved profitability shows that the franchisor's improved
operational efficiency and economies of scale through bulk purchasing
can help reduce business costs for franchisees. Source:
Franchise and Licensing Association Singapore | 
