The Benefits of Outsourcing Franchise Sales

There's a huge difference between selling a hamburger and selling the hamburger shop, as anyone in the franchise sales business will tell you. With the hamburger, the customer gives their order, the burger gets flipped, topped and eaten, and the customer goes on their merry way. The hamburger salesman doesn’t need to determine if the customer will be a good partner in this transaction, he doesn’t need to discuss with the customer exactly how they're going to fund that hamburger purchase, and he doesn't need to coach, guide and aid them through how to take each bite and swallow.

With such a big investment, the franchise sales process requires not only a high level of salesmanship and finesse, but also a large amount of patience. Most deals don't happen overnight, and they require a large investment of time. So, while franchisors look to increase their unit numbers and enter new markets, many have turned to outside agencies or sales groups to handle the franchise sales process.

Robert Stidham has been in the franchise business for more than a quarter century, and he serves as the CEO and President of Franchise Dynamics, a full service outsourced franchise development company that has been helping franchises grow since 2006. From his involvement with IFA, and speaking with those in the industry, he discovered a gap between the ability to run an operationally successful franchise while also focusing on steady, positive growth.

“The difference in success is less in the quality of the concept, and more in the quality of the execution,” said Stidham. “Most new franchisors are absolute experts at their core business. However, franchising is new to them and its own very complex business.”

So, Stidham set out to provide a resource that would remove the burden of the franchise sales process so franchisors could focus their time and energy on improving operations and acting as a true partner for the variety of issues that arise through the process of launching a new unit.

For those considering outsourcing, Stidham spoke with 1851 to share a few considerations to keep in mind.

1. The balancing act between operational excellence and franchise growth

“The franchisor needs to prove to franchisees that this is a wise investment, and the support of the franchisees has to be immediate,” said Stidham. “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.”

2. The key in “franchise sales” is the “franchise” part

“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.”

3. Time is money

“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.”

4. Beware of liability

“If the franchise sales process is outsourced to brokers or agents, the franchisor is completely legally liable,” said Stidham. “If you have someone sell for you and they break the rules, you’re liable. That’s why Franchise Dynamics carries insurance and only hires W2 employees—it gives us and the franchisor a high degree of control and better outcomes—and after a decade, we’ve never had a regulatory complaint, lawsuit, or settlement.”