3 Tips for Creating a Successful Franchise Sales Budget

Whether an emerging franchisor is entering the industry or an established brand is looking to update its budget to better reflect the needs of the market, there are a number of factors that go into creating a successful franchise sales budget.

“The franchising industry is continuing to evolve at a rapid rate, and brands need to adjust their sales budgets in order to keep up,” said Franchise FastLane’s Ryan Zink. “What used to be the standard marketing spend on franchise deals is no longer cutting it, and it’s likely that the number of concepts will continue to climb in the near future.”

As the industry becomes more crowded, there are more concepts competing for a smaller pool of prospective franchisees. Both consumers and aspiring business owners have more options than ever before when it comes to choosing a franchise. That means that brands need to allocate more money to franchise development and sales.

Look at Unit-Level Economics and Determine Funds

“This may seem obvious, but for emerging brands, the first step needs to be really paying attention to spending and keeping close documentation,” said Wag’N’Wash president Rob Flanagan. “If they’re not careful, emerging franchisors can easily start overspending and not realize where their funds are going.”

To figure out how much a brand should be spending on franchise sales, the first thing that they should look at is their unit-level economics. Brands with strong unit-level economics may not need to spend as much because it’s clear to candidates that they represent a strong business opportunity. Secondly, franchisors need to consider the total cost of the franchise opportunity. Generally, the higher the investment is, the more a brand is going to need to spend to market it.

Most franchisors, emerging or established, are trying to calculate how much it really costs to close one franchise deal. While it is nearly impossible to come up with a definitive method that’s guaranteed to lead to results, franchisors would be wise to assume that the dollar amount is higher than what is initially expected.

Focus on All Aspects of the Discovery Process

Many franchisors are running a process in which the materials don’t match the high quality of the brand,” said Zink. “Signing a franchise agreement is a huge decision and franchisors need to prioritize and invest in an in-depth Discovery Day process, not just a Skype call or a two-hour meeting.” 

Franchisors should prioritize the franchise development process as an important sales process—and should spend appropriately and have an accountability system to assure it is being executed the right way. 

“At the end of the day, franchise sales is a form of marketing and there needs to be an array of funnels to secure leads,” said Flanagan. “Too often, emerging brands will see that all of their leads are coming from one place and avoid spending anywhere else. Franchisors need to spread their spending over multiple marketing silos and techniques in order to succeed.”

According to Flanagan, franchisors should study the data in order to understand where leads are coming from, whether it be brokers, house leads, Facebook Ads and social media platforms. The brand always needs to be looking at the big picture in order to avoid putting all of its eggs into one basket. 

Invest in Local Marketing and Happy Franchisees

Franchise development and marketing do not begin the day the operation opens. “On a local franchisee level, franchisors often don’t spend enough money leading up to an opening of their business in order to take advantage of local marketing,” said Zink. 

Local and low-cost marketing efforts include tapping into referrals, friends and family, vendors and suppliers or just word of mouth. These efforts help franchisors utilize their own network of happy franchisees in order to leverage validation. Plus, this incentivizes the franchisor to prioritize adequate training and support for new franchisees in order to promote referrals to friends, family and customers. Franchisee validation encourages a brand’s own network of fans to buy into the franchise. At the end of the day, the franchisee is the customer.

“Remember that the relationship with the franchise partner begins the moment they become aware of the brand,” said Flanagan. “Franchisors both big and small need to keep in mind that the consumer side plays heavily into what happens on the development side. If the consumer offering isn’t great, it can hurt franchise sales in the long run. Every aspect of the brand influences the development side, not just the franchise sales budget.”

Lastly, Flanagan recommends strong communication between departments and teams. If the franchise development team is spending a certain amount of money but the operations team is unaware, it can create a misallocation of funds. By ensuring that everyone is on the same page, the franchise sales budget will be easier to implement successfully.