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.

Figure 2: Franchising as a more feasible option of business expansion than starting own outlets

Success of the Franchise
The results further showed that two-thirds of the franchisors surveyed felt that their franchises were generally successful (Figure 3). 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.

Figure 3: Success of the Franchise

Business performance had also improved for the franchisors. About 83% of franchisors enjoyed an increase in average monthly sales since embarking on franchising (see Figure 4). 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.

Figure 4: Franchisors' Improvement in Average Monthly Sales since Franchising

Franchising also enjoyed increased profitability, with about 72% reporting an increase in monthly net profits since they started franchising. As shown in Figure 5, 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.

Figure 5: Franchisors' Improvement in Average Monthly Net Profit since Franchising

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
Figure 7 shows that about 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.

Figure 7: Franchisees' Response to the Statement:
"Joining a Franchise has Helped Me to Do Better than Before."

Business Performance
Close to 80% of the franchisees experienced an improvement in sales since converting to a franchise in the same trade (see figure 8). 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.

Figure 8: Percentage Increase in Average Monthly Sales for
Franchisees who were Previously Running a Business in the Same Trade

Franchising also helps to improve the bottom-line of franchisees (See Figure 9). 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.

Figure 9: Percentage Increase in Average Monthly Net Profit for
Franchisees Previously Running a Business in the Same Trade.