Fran X | How to Measure ROI on Franchise Development

The Next McDonald's (Big Idea)

Accelerated Franchise Sales that Outpace Your Marketing Spend?

The snowball effect.

The moment when the uphill push and pull of your franchise development strategy, marketing, and deployed assets reach a tipping point. The moment when gravity turns from a force of resistance to momentum. The moment when your franchise sales snowball steams down hill gaining greater energy and strength as sales outpace development dollars and your brand gains attraction from franchise brokers, organic leads, and digital marketing spend.

The effect is real but few ever get to experience it! The reason why? There are many reasons but the most common culprit is expecting too much out of your marketing initiatives and ignoring the long-term cumulative snowball effect. Once you go down that road there’s a tendency to focus on short-term and immediate results.

What follows next is disappointment, starts and stops, and deployment of inconsistent development strategies. There’s confusion and, many times, there’s a reset every year. As if on January 1 of every year something new is about to happen and yesterday’s marketing spend is forever gone.

The marketing dollars that you spend today, if deployed properly, should have an impact 6, 12, 24, and 32 months from now. How do you get there? Think long-term. Build your franchise development budgets around a 2, 3, 4 and 5 year plan. Spend your dollars on long-term tactics that keep building on one another, that reinforce your brand story, that consistently engages brokers, and that system-wide efforts that will determine what your validation, and Item 19 KPI’s will look like years from now.

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Killer Brands

Emerging Franchise VaVia Is Setting a New Standard in the $60 Billion Waste Disposal Industry

With proprietary technology, streamlined operations and a leadership team backed by a combined 50-plus years of experience in the waste, franchising and technology development industries, the mobile waste removal franchise is continuing to appeal to qualified candidates across the Southeast.

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Franchisees Kicking Ass: The Franchisee Is King

The Great Franchisee: Jason Maier, Renovation Sells*, Denver

The finance-pro-turned-home-flipper has signed on to open Colorado’s first three territories with the fast-growing home renovation concept.

Jason Maier built his career in the finance industry and worked for the past decade and a half in operations for a retirement company. But the finance expert never quite felt fulfilled in his line of work until the COVID-19 pandemic offered him a new route. Now, Maier is one of the newest franchisees with Renovation Sells*, the fast-growing home-remodeling franchise that makes presale renovations to make homes ready for market.

When COVID-19 hit, Maier decided to take the voluntary separation package his company offered and commit to a plan he and his wife Jacey, an interior designer, had long fantasized about: flipping houses full time. After flipping their first home, Maier says he realized the market was too saturated with buyers, so they decided to pivot to franchise ownership with Renovation Sells.

Maier signed to become Colorado’s first Renovation Sells franchisee, with an agreement for three territories in the state.

Yo Broker, Sell My Franchise

Top Franchise Brokers: Matt Genova, NEXT ACT Franchise Advisors

Genova uses his experience to act as a matchmaker, helping prospective franchisees achieve their personal and professional goals through business ownership.

Prior to entering the franchising world, Matt Genova, president of NEXT ACT Franchise Advisors, enjoyed a career as an accomplished and energetic multimedia sales and sponsorship executive for CNN and ESPN. Over that time, he learned to help companies both big and small form emotional connections with their current and future customers. Since becoming a franchise broker five years ago, Genova says he now does the same thing, only this time he helps people create emotional connections through business ownership.

When it comes to what winning looks like to him as a franchise consultant, Genova says he wants all parties involved to feel as though they changed their life for the better.

“Whether it is the franchisor, the franchisee candidate, the lender or any decision-makers in the process, I want to make sure everybody made the right choice,” Genova said. “Even if that means helping a candidate realize that a certain brand isn’t right for them, that is still winning to me because I know they learned a valuable lesson that will make their life better.”

Watch the full interview with Genova above, or click here to watch it on YouTube.

If you are a potential franchisee looking to invest or a franchisor looking to attract new candidates, contact NEXT ACT Franchise Advisors at https://www.nextactfranchiseadvisors.com/contact.asp.

The Bottom Thoughts

Franchise growth, franchise sales, franchise development -- is a complex equation when it comes to finding success in growing a franchise. Thus, determining what your ROI is can also be complex. Here’s part of the equation:

Where will you gain interest of prospective franchisees?

In today’s franchise growth world, there are three primary ways brands grow:

• Organic Lead Generation: Fans of your brand (new and mature) who go into your development web site and inquire about ownership.
• Broker Network: Someone else establishes a relationship with the candidate, educates them about your opportunity, and pushes them toward your brand.
• Referral: A franchisee or friend recommends a candidate looks at your brand.

How do you budget for each of those buckets?

After identifying your buckets of activities, now comes the budgeting. Decisions will be made based on the investment level of your brand (if you are a restaurant, you may, for instance, not use the broker network). Most franchisors will spend between $10,000 - $25,000 per deal on franchise marketing (digital advertising, shows, portals, newsletters, print, radio). Thus, in the most simplistic way, if you want 10 units in 2022, you will want to budget between $100,000 - $250,000 (depending on your historical data). Then, you will want to figure out how much you want to spend in each bucket (our recommendation is to focus on the areas of greatest return from previous years).

Then, you measure.

The lead generation equation is complex. It can take candidates 6 months + to go from first impression of your franchise opportunity to lead; and then add on the time to convert that lead into a deal. Thus, if you were to deploy $10,000 on Google ads today, you may set yourself up for frustration because those leads won’t mature until middle of next year. This is a challenge for a franchisor world that wants to move faster than data suggests.

To measure ROI, though, go far beyond the franchise fee. Go into deal value:
Average Unit Volume X Royalty X 5 to 10 years X Number of Units Franchisees Own on Average = Start to Deal Value

Then, look up at the sky, and imagine how much you will get in multiple when you sell the franchise.

You see, when you start looking at return, it can be great. Especially if you qualify the right franchisee. ROI, you see, can be quite large.

Eventually, you will want your brand to hit a snowball effect, where more franchisees are coming in than you budget for (with historical data). This will happen when you have internal growth, strong consumer presence -- and the blocking & tackling of a good business.