Understanding the Costs of Franchise Development

Franchise brands that win do so because they build momentum through franchise development that is driven by leadership, core purpose, analytics, strategic planning and more. On the flip side, franchise brands that lose are missing pieces in the greater development puzzle. They have blind spots that lead to lost opportunities and are left in an “almost there” stage where everything feels difficult and expensive. 

As part of #TheGreatReturn franchise summit, 1851 publisher Powills and franchise legal expert Charles Internicola hosted a webinar with Hand & Stone Vice President of Franchise Development Bob McQuillan, SMB Franchise Advisors* President and CEO Steve Beagelman and TruBlue Total House Care President Sean Fitzgerald to discuss how the brands have prioritized spending.

Powills noted that COVID-19, in particular, has forced franchise brands to rethink the way they approach franchise development. 

“Maybe you don’t have to do discovery days in person,” Powills said. “Maybe you don’t have to do training in person.”

The conversation focused on some key areas where franchise brands should invest: 

• In terms of websites, brands should make sure they have built their website to do things such as convert leads and guide due diligence. When prospective franchisees land on a franchise brand’s website, for example, they should be able to clearly learn about the franchise opportunity and the industry. 
• Despite the fact that some franchise portals have strong SEO value, they still don’t produce quality leads. The effectiveness of print ads is difficult to measure, and radio is likewise expensive and tough to track. And while franchise expos still exist as one method of attracting franchisees, they only work best if marketing for the shows has driven the right target audience. 

So what should franchisors’ cost per lead be? 

“Every brand is different,” Beagelman said. “It’s a lot harder for an emerging brand to generate the amount of leads compared with an established brand with 500 units that has name recognition across the country. It really is hard to quantify that. You have to look at what your budgets are and, based upon your budgets, how many leads are going to come in and how many leads are going to turn into applications, and applications into discovery days, and discovery days into signings.” 

McQuillan noted that at an earlier point in Hand & Stone’s history, the brand tried a variety of methods to ascertain the best ways to acquire leads. 

“When I started about 11 years ago, my budget was less than $50,000 annually,” McQuillan said. “When you start out, you’re basically throwing spaghetti at the refrigerator and hoping something sticks. We did a little bit of everything, and then we kind of sharpened the claws, honed our skills and figured out what works. Then, four, five, six years ago, 60 to 70% of my business came from consultants and broker networks.” 

Fitzgerald noted that the way people research franchise opportunities has drastically changed over the years. For example, prospective franchisees today take much longer to get on the phone with a brand than they used to. They are more likely to prefer learning as much as they can about the brand online before they pick up the phone. For this reason, it’s important for brands to invest in their online presence. 

“The information about your brand is going to be online, whether you’re controlling it or someone else,” Fitzgerald said. “And if there’s not enough information there, you may not be getting people to engage with you.” 

Fitzgerald noted that most people who check out the website don’t take any steps forward, and this is often misinterpreted as disinterest. For this reason, he said, franchise brands should make sure they tell their stories well on their websites. 

“The vast majority of people who inquire about your franchise brand you do not get a hold of,” Fitzgerald said. “The misread there is that those people are not interested. Many salespeople will just archive them and never touch them again. The opportunity there is to provide people with information about your franchise brand and get them excited and engaged so that they do want to speak to you.” 

There are a variety of ways for franchise brands to evaluate where to spend their growth. By carefully examining their budgets, closely monitoring what works and what doesn’t work and following prospective franchise buyer trends, franchise brands of all sizes can ensure they spend their money wisely.