The below is a four-part series. The column will build throughout the month of December. Each part is defined by a headline. Return to this URL (bookmark it) for the continuation of the story as the month goes on.
The Start of the Franchise Buying Journey
I am your prospect.
I want an interesting brand. Recently, I have had interest in owning my own business. I am not overly interested in starting my own business. Franchising or licensing seems to make the most sense.
Work is frustrating. I am not moving high enough up the corporate ladder. I would like to have more flexibility for life with my family. I have saved up some money, have good credit and own a home.
I have never worked in the restaurant industry, so, while it would be fun to own a restaurant, I know I need to focus my search on businesses that align with my background.
I am confident that I have a strong relationship with my community. My children play sports. I am an active volunteer. I have a good group of friends.
I know I am not the best marketer. I don’t know how to market a business. I will need some support there.
I am not sure about timing. I guess it will happen when the timing is right.
There is a local franchise broker who advertises in our local newspaper. I am not sure if I need a coach or not, but it won’t hurt to have a conversation.
I am going to explore online. See what I find.
Think that’s complex? I surely hope so.
The prospect’s buying process is not easy. It is not as if they are buying a simple widget. They are changing their lives.
In many cases, they are not going to be sophisticated in operating a business. This is why they are picking a franchise. They want to buy into a proven system. They want a guide.
Now, what about the due diligence process?
Turning from Lead into Prospect
I am ready to inquire. I fill out a few forms hoping to get a little more information.
I found a website full of franchise opportunities. When searching for more info there, I clicked on a few other brands I want to learn more about.
Wait, my train of thought has to pause. My phone is ringing. My email is dinging. A text message? How did that happen? What’s this brand that keeps contacting me? I don’t believe I ever clicked on that brand for more information.
I am getting stressed. Time to pause.
Overwhelmed prospects are not good buyers. Think about the way a house is sold (which is arguably less of a life change and more on course than buying a franchise). Agents may lead the witness a little, but they put a lot of control and timing within the buyer’s hand. Yet, in franchising, we are conditioned to sell. Is this the right way?
In today’s marketplace, there are more and more franchise brands competing for the same or less leads. Growing brands have more brand reach (in existing units and development investments), therefore, the emerging brands are left struggling.
In a struggling marketplace, is it better to be one of the brands that creates a stressed environment for franchise prospects or one that figures out a way to change up the sales process a bit to make it more convenient for the buyer?
So, I am your lead (technically), but I am not your lead. I am a lead to franchising. Let’s get that straight. I am the one pretty person in a bar full of others interested in just me. I am going to look at several brands to figure out what brand makes the most sense for me. At this point, I am in control.
I am going to talk with your existing franchisees. Good validation? I continue exploring your brand. Validation regret? I am going to move on. I want to make sure I am joining a brand that has a clear pathway to success for franchisees, has picked the right franchisees to be a part of the system and clearly is invested in the support and the success of the franchisee.
I am going to look online. Good buzz? I continue. Bad news? I drop. News about growth? I continue. No news? Brand doesn’t have the buzz.
I am going to talk with my friends. Have they heard about your brand? That will help.
I am going to talk with an attorney and my accountant about your FDD. Does it tell a good story?
Are Leads Really Leads?
In franchise development marketing, it seems as if brands are only interested in “leads”. Leads are fine, but leads are not the true definition of a prospect.
Lead generation that simply drives people to inquire is a waste of time for your sales team and for the prospects who will be at different stages.
Lead generation is a full circle approach of touch points and the sales process. If you really want to win at franchise leads, then you need to take a holistic approach to your strategy: web, PR, marketing, advertising, digital, social, sales process, validation, FDD. You need to have different matrixes for different leads. Hot lead, medium lead, cold lead; financially qualified now or in the future; has done research and has not. Each will require a different level of nurturing to turn what you call a lead into what I call a prospect.
Prospects should be the desired outcome, not leads.
Recently, I was discussing the value of the prospect with a client. They said, “Let me get this straight. If we spend more money on less leads, we will find more prospects?”
“Yes,” I said, “in theory.”
The theory would seem to be correct. If you double up the $$$ you spend per lead, you should find more prospects. The challenge, though, in today’s marketplace, is that it is competitive, crowded and the sales process is trickier than it has been in the past.
Real estate, market availability, comp sales – are all having an impact on the process.
I have decided to buy.
Next up, discovery day.
If I am flying to somewhere undesirable (an area that doesn’t keep my emotions at an all-time high), then, can my opinions change?
For an established brand, perhaps not. For an emerging brand, possibly.
Imagine landing in a cold market, freezing, being stuck up in a crappy hotel with crappy coffee and then going to your office for a six-hour presentation on how your brand will transform my business life.
Discovery day should be a two-way evaluation, sure, but it should also be a day of emotional highs. I should leave feeling as if I spent a day in the shoes of a franchisee. I should be able to see myself in your brand – not just at an entry point of one unit, but with growth in mind.
Franchise Lead Generation Is Tough
Franchising, today, is tough. It is a jam-packed marketplace.
Let’s look at some hypothetical math (not proven):
- If there are roughly 800,000 franchise locations in the United States and a 1.7 percent growth percentage, then there will be roughly (rounding up, to be generous), 14,000 new franchises each year.
- If there are 4,000 franchise brands, that means if each brand was created equally, then each would add three locations per year.
- Let’s divide that number in half, as viable franchises. Now, the number is six.
- If I were to take No. 196 – No. 200 in the Entrepreneur Magazine Franchise 500, those brands added 138 units last year (No. 200 Senior Helpers added nine, No. 199 Patrice & Associates added 40, No. 198 HomeWell Senior Care added seven; No. 197 Bar Louie added 10 units and No. 196 ILoveKickBoxing added 72 units). Let’s say that each set of five in the Entrepreneur Magazine Franchise 500 represent the same number, then the list would hold 7,200 locations, or half. If 72 units is the average, then each brand on the list would hit 14.4 units per year in growth.
- At 14 new units, in historical franchise math, that will need 1,400 “leads”. Qualified will be far less.
So, what is your realistic growth strategy for next year?
What about budgets? This is where things get crazy.
If the average brand will spend $15,000 (some way more, some less) in franchise marketing, then, on average there will be $210,000,000 spent on franchise marketing. WHERE IN THE WORLD IS THAT GOING?
Let’s say that number is half. It’s still $105,000,000 spent on franchise marketing. For leads?
This is where I think there is opportunity to change views on what the true goal is (forget about evolving the sales process to be more of a process than selling a used car).
Sales leaders are forced to get these “deals” done. If “deals need to be completed”, then the process will be sloppy. It will be more about the deal than the right franchisee.
I would love to see a study performed on brands that sell or use a sloppy broker. What is the life cycle of those franchisees? How many close? How many poor (not financially, more as in “I feel bad”) people got into franchising when they shouldn’t have?
What if we started looking at the value of the deal? What if brands rewarded based on the business life and success of a franchisee? What if it wasn’t just about a franchise fee but the value, in royalty, and perhaps in value of sale? Would sales people be incentivized, paid and looked at differently? Would operations be looked at differently?
Franchise Sales Needs to Evolve
The data supports it – franchise sales needs to evolve. The cost per deal is skyrocketing. The prospect availability is declining. The brand competition is increasing. This creates temporary industry chaos. Mix in more regulations, more government concern and the real possibility of a correction at some point – it’s time we shake things up.
Prospects must be the target. How many leads does it take to get a deal? One. Just one.
There is order to winning at franchise sales.
First, we have to treat our current franchisees right. Their locations and footprints are vital to growth. As locally owned and operated units, they are the billboards for our brands. They are the “like me” stories that exist – helping prospects see themselves in the shoes of our franchisees. Without a great brand (or emerging concept) and without validation, your sales won’t be efficient – instead, your sales will be rather costly and turbulent.
So, if we focus on efficiency in sales, we have a shot at winning. Methodical in marketing, structured in process, strong in support and opening.
Franchise growth is not hard, as long as the foundations are strong:
- Great concept/brand
- Consistent and desirable product
- Strong unit level economics (opening huge, stay strong and interest in growth)
- Invested leadership
- Innovation when necessary
Franchise sales has been made to be difficult. But, a lot of the difficulties are built outside of what the traditional sales process should entail. Difficulties are formed when CEOs randomly request a number in growth that is unachievable, operations teams don’t support growth, marketing teams that aren’t invested and earn bonuses for strong unit-level economics – and many more outside of sales.
Sales should be a team effort. This is why some of the best emerging brands continue to grow – when the founder is willing to get his/her hands dirty in any portion of the business for the greater good of the franchisee and of the brand.
I am a prospect (no longer a lead). I have seen your brand. I am ready to buy. I am prepared to grow. I have found your brand and my confidence is high, backed by your confidence and excitement and backed by the positive interest of your current franchisees.
Your website was great. It gave me background that supported my decision and guided me to more content that eased my discomforts of unknowns. Your brand buzz is fantastic. People are raving about your product on social media.
I am a prospect who is qualified and ready to buy.
Are you interested?