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How franchisors can sell more units and set themselves up for success

It is important franchisors set themselves up for success by having the required resources to handle multiple franchises and support multi-unit operators.
It is important franchisors set themselves up for success by having the required resources to handle multiple franchises and support multi-unit operators.

By Lori Karpman

Over the past year as a result of the COVID-19 pandemic, many food franchisors have put their franchise development on hold. Alas, this could not be a more ideal time to sell franchises. Prospects have been furloughed, packaged out, or worse, dismissed with no financial security. People are realizing their financial vulnerability, and often look toward self-employment as a measure to regain their financial footing. So, how can franchisors sell more franchises this year?

The first decision that needs to be made regarding the sales process is whom the prospect will engage with (i.e. will they speak to the CEO, an in-house franchise sales employee, or an outsourced third party. There are three different models one can consider:

Do it themselves

Most new franchisors choose this alternative, at least in the beginning. Often the CEO or a founding partner takes on the task of lead generation, candidate evaluation, and closing the franchise sale. This gives them first-hand experience of what the sales process looks like and how it should function. It also allows new franchisors to keep their selling expense to a minimum. Initially, new franchisors do not need a salaried salesperson as they are not getting enough leads to recoup that cost. There may only be five or 10 calls to make per week for the first few months. Therefore, it is recommended one spends their money on advertising their new franchise offering than on salaries and benefits at this time.

The do-it-yourself (DIY) strategy is not suited to everyone. Franchisors must feel comfortable talking about their brand and service and how it is a better investment than anything else prospects are considering. Moreover, the DIY method diverts attention from efforts in building the core business at the franchisee level. For these reasons, this approach is often viewed as a short-term alternative, which then leads to services being filled in-house or outsourced. Using regular staff members to do sales is never a good idea as they may not have the skillset or be aware of the laws that must be followed when selling franchises.

Hire an in-house franchise sales professional 

Adding an experienced franchise professional to one’s in-house team is the next logical step for most franchisors. They should look for someone with a track record of success so the business can benefit from their experience. Typically, commissions paid to salaried salespeople are lower than the incentives provided to outsourced sales professionals or consultants, so the former can be more economical in the long run, as far as commissions are concerned. That said, a sales employee can become expensive over time, especially if there are company benefits such as retirement account matching, health and dental insurance, etc. Depending on the number of leads franchisors generate and the franchises they want to sell in a year, outsourcing may be less costly in the long and short run.

Outsourcing

If one is sending emails via a drip campaign, they should try to keep them to a maximum of two per week.
If one is sending emails via a drip campaign, they should try to keep them to a maximum of two per week.

Franchisors already outsource many tasks, including accounting, legal, and payroll. Over the past few years, the trend to outsource franchise development has grown more popular as it is considered a less expensive option from an out-of-pocket perspective. Consultants are responsible for overseeing the franchise sales process from beginning to end. They take all the development functions off the franchisor’s plate and handle many tasks, including franchise marketing strategy, initial lead generation, managing prospect database, distribution of materials to interested parties, organizing and conducting discovery days, trade show attendance, franchise disclosure document (FDD) management, and sales closing support. One should look for a full-service firm that can handle all or many of their development needs under one roof.

Outsourcing has numerous advantages, which includes giving franchisors the ability to work ‘on’ their business and not ‘in’ it. Additionally, consultants generally do not need any special training other than what may be required by the franchisor to effectively sell the franchises. Many consultancy firms take a monthly retainer fee and a commission on each sale. The fee is generally lower than a paid staff member, but the commissions are higher. Most franchisors do not mind choosing a higher commission as they do not view it as an out-of-pocket expense; it gets paid from the initial franchise fee, so they only pay out of the money received. This option also reduces a franchisor’s overhead as no benefits are involved.

In all cases, franchisors remain liable for lead generation and ensuring there is a marketing budget to identify leads for the consultant. Consultancy firms first verify the budget before they promote the opportunity.

Additionally, consultants are not brokers—the latter get paid for finding leads, while the former are remunerated to sell and close them.

The only disadvantage of outsourcing is how much control franchisors can exercise over the sales process or salespeople. Ultimately, consultants are not employees, and there is a limit on how much authority one can exert over them. If a consultant is working on straight commission, which is rare, franchisors will have even less control. When a consultant charges a monthly retainer fee, it is because the franchisor wants to tap into the former’s valuable database of prospects, influencers, and investors. It takes consultants tens of years and thousands of dollars and hours to build their professional network, hence it involves a cost.

Some actionable tips franchisors can consider include:

  1. Reach the researchers

Individuals looking for business opportunities are big researchers, most of which is done online. Franchisors must make sure their business is visible online, not only on social media, but also on franchise web portals that prospects often visit. Next, it is a good idea to provide in-depth information about the brand. This weeds out tire kickers who will go through the data and then self-disqualify. Franchisors should create a one-page guide or presentation on their website that includes financial information, franchisee data, statistics, and testimonials from current franchisees.

  1. Do not overload prospects with information via email or text message

Statistics show if one can reach prospects when they request information, their conversion rates will be significantly higher. In fact, if one can get them within the first five to 10 minutes, their chance of closing is 95 per cent higher. If the wait is too long, prospects may get calls from other brands they have contacted, and franchisors may risk losing the opportunity. If one is sending emails via a drip campaign, they should try to keep them to a maximum of two per week. Franchisors can speak not only of the value of the franchise, but also share some exciting information such as new franchisees, products, or services.

  1. Plan for growth

If one wants to grow their franchise system, they need to ensure their operating and sales systems are top notch. It is important franchisors set themselves up for success by having the required resources to handle multiple franchises and support multi-unit operators. One must ensure their existing franchisees are onboard with the growth program. Many franchisors are so focused on getting new franchisees they forget to take care of the ones they already have. One must remember franchisees are on the frontline, and happy franchisees are the best salespeople one can ask for. It is critical franchisors invest in their existing franchisees, and the latter can help advance the business by referring new leads. Prospects will contact current franchisees for additional information, so one must ensure they do everything they can to make sure the call is a success.

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