Restaurant Franchisee Satisfaction Problems
Franchise Business Review (FBR) dubiously reports that restaurant franchisees consistently (in their survey) have the lowest franchisee side satisfaction ratings. FBR President Michelle Rowan, in the interview opines that that is due to all the challenges that segment faces: employee turnover, food costs and the expense/equipment needed to start a food franchise.
The report (attached ) lists an average "food and beverage" investment of $362,250 and "annual profit" of about $90,000, per the chart on page 7. Unfortunately, this was the worst investment to earnings ratio among the sectors listed on the chart.
The $90,000 includes both multiunit and single unit franchisee reported earnings before tax, so a better apples to apples number is needed..
As we know, debt service and CAPEX (remodeling, new equipmernt, etc) may or may not be in these numbers.
This is worth a followup and I will post additional information upon investigation.
John A. Gordon is Principal and founder of Pacific Management Consulting Group, which provides chain restaurant sales, profitability, earnings and economics research and special analytical projects to those in, or who need to know about the restaurant sector. Among others, we support franchisees and those supporting franchisees.
Gordon has a long background in chain restaurant operations and financial management roles, such as cost analyst, financial analyst, manager of planning and analysis and CFO, and has been consulting since 2000.
He is passionate in providing independent, creative, detailed and useful perspective, with no conflicts of interest. Email him or call (619) 379-5561.
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Pre-Tax Revenue
John, you are right to point out that FBR ought not to talk about earnings at all. They are aggregating pre-tax revenue and reporting on that. And it self-reporting at that. There is no reason for Michelle to talk about "earnings" or "annual profit", as its misleading and detracts from their overall reporting.