Does Outsourced Franchise Sales Work?

When it comes to successful franchise sales, outsourcing can be an attractive option for brands that are struggling to grow organically, but it isn’t an ideal strategy for every franchise. 

Since purchasing a franchise is such a big investment, the franchise sales process requires a high level of salesmanship and finesse. A franchise sales outsourcing (FSO) company takes on the franchise sales from beginning to end, handling leads, managing documents and even taking care of the Discovery Day. That is why many franchisors looking to increase their unit numbers and enter new markets have turned to outside agencies or sales groups to handle the franchise sales process.

The question is: Does outsourcing work better than creating an internal franchise development team? The answer likely depends on the goals of the franchisor. Emerging brands that are looking to generate 15 deals or less, for example, probably don’t need a full-time development employee. Instead, hiring an FSO can save them money, while also ensuring the brand can reach a certain unit count in a faster time frame without sacrificing on the critical franchisee support required for a healthy system.

“The franchisor needs to prove to franchisees that this is a wise investment, and the support of the franchisees has to be immediate,” Robert Stidham, CEO and president of Franchise Dynamics, told 1851 Franchise. “You have to grow your system—those who invested and see a community that isn’t growing start questioning their investment. In the real world, growing the business is important, and since it’s not immediate, that often gets pushed down below operational excellence. Most franchisors aren’t growing over 100 units, and most plateau there because they don’t know how to balance running the business with growing the business. In our business model, we take that burden off of people so they can grow while they can focus on improving the business and operations.”

The success of outsourcing franchise sales will also depend heavily on the specific FSO. Qualified brokers have been in the industry for a while and are able to lean on their relationships for lead flow and content sales, which can help accelerate the development process. However, the wrong broker may simply go after low-hanging fruit just to complete the project.

“Don’t hire someone who has been successful in sales — find someone who is experienced in franchise sales,” said Stidham. “Franchising is a highly regulated industry, especially the sales process. In most concepts you’re asking the buyer to walk away from their job and invest everything they own with people they don’t know, and generally they can only give limited information on the financial investment and returns. It’s much harder than it looks.”

Brokers that are solely focused on quantity of leads as opposed to quality are likely to generate a lot of bad leads, which may result in unqualified franchise owners who will cost the franchisor time and money in the long run. That’s why it’s so important to thoroughly vet brokers in the hiring process and ensure they have a history of bringing in high-quality leads for reputable brands.

“Many folks underestimate the complexity and time commitment to sell franchises in even a low level,” said Stidham. “We are helping launch and grow new concepts every year — and it took us time to figure out the right formula for success. It’s a very long sales cycle. For new franchises there isn’t good and strong validation yet. Many CEO’s just can’t invest the time that’s needed. If you don’t have people who know what they’re doing, you’re going to run into a lot of problems.”

For brands that are looking to expand their footprint the right way, outsourcing franchise sales does indeed have the potential to work well, but only if the brokers involved are prepared to do what is best for the brand and each individual owner. By doing their due diligence and plotting out any long- and short-term goals before proceeding with the franchise development process, franchisors can determine whether outsourcing franchise sales is the right strategy for them.