What to Consider When Setting Goals for Franchise Sales Growth

A common mistake made in franchising is setting unrealistic goals. Everyone wants to sign as many deals as possible in a given month, quarter or year, but it’s important to follow the common business rule of thumb: underpromise and overdeliver. While that might not make the CEO or CFO happy, the reverse is far worse — setting goals that are nearly impossible to achieve based on the size of your brand and budget. Before you get started on setting goals, take a look at our tips for creating a solid strategy that will earn you a standing ovation at your next board meeting.

Test the Waters

In the case of Big Blue Swim School*, “testing the waters” is both literal and figurative. When national champion swimmer Chris DeJong founded the swim school brand in 2009, he approached growth methodically. He opened four locations in the Chicago area over four years before a majority stake of the brand was acquired by Level 5 Capital Partners to grow the brand through franchising. By running and optimizing the business for over a decade, Big Blue was armed with historical data for four high-performing units to clearly illustrate why the brand was a viable opportunity for franchising. 

Home Clean Heroes*, a residential cleaning franchise under the Buzz Franchise Brands umbrella, utilized a similar strategy. After acquiring and growing the Mosquito Joe*® brand (acquired by Neighborly® in 2018), Buzz Franchise Brands wanted to create a new home services franchise company. Instead of using Mosquito Joe’s playbook of rapid growth, Buzz Franchise Brands developed the Home Clean Heroes brand in 2017, testing it for over a year in a corporately owned location. By doing this, the team was able to test the viability of the concept, develop systems for marketing, technology and support, and create a solid growth plan. 

“Before you can grow, you have to know without a doubt that your product or service is scalable,” Home Clean Heroes president Joe Delatte wrote in a byline on the International Franchise Association’s FranBlog. “Franchisors should know how to run every single aspect of the business including potential problems and solutions before allowing franchise partners to join the system.”

This thoughtful approach has paid off, most recently through a six-unit deal to bring Home Clean Heroes to the Atlanta area.

Show Me the Money

Not just a popular line from the 1996 film “Jerry Maguire”, “show me the money” should refer to the first step you take when identifying your growth goals — your budget. Finding the right potential franchise partners isn’t easy, especially for an emerging brand or one with stagnant growth, so creating a realistic budget is key. According to the Annual Franchise Development Report published by Franchise Update Media in 2019, franchisors had recruitment budgets averaging $215,173 with a median of $150,000. The FranConnect Franchise Sales Index Report for 2020 reported a 1.02% average lead-to-deal ratio, which should help you determine how many leads you might need to reach your sales goal. Unfortunately, franchise development is more of an art than a science, but this formula is a good place to start. 

Protect Your Brand

As a franchisor, it can be tempting to sign any properly-capitalized franchise partner that inquires; however, in the long run, this is a short-sighted and misguided approach. Many franchisors have made this common mistake, and it’s difficult to turn down that much-needed franchise fee. After a franchisor has spent months or years refining its brand, that hard work can be immediately erased by bringing on the wrong franchisee, potentially leading to poor performance, and worse, poor validation.

As Brenda Febbo, Chief Marketing Officer at Lightbridge Academy* told 1851 Franchise earlier this year, franchise development is not about finding franchisees — it’s about finding the right ones. 

“When you look at KPIs and determine which franchisees are performing highest, it’s always the ones who have their core values aligned with the brand,” Febbo said. “No franchise can have a sustained system through franchise sales alone, it has to be through royalties. That is why franchise growth goals need to be more about finding the right people that will succeed in the long-term, rather than just making the quick sale.”

When creating your growth goals, it’s imperative to not lose sight of what makes your brand special — you owe it to yourself and your team to make sure that every franchisee that enters the system understands your mission and core values and that the concept is a mutual fit. 

If the impact of COVID-19 has taught us anything, it’s that the best-laid plans go astray. Even if you have the right budget, the right concept, the right marketing strategy and have properly identified the right potential candidate, so much is still out of your control. While some brands have thrived in a COVID-19 world, others have had to take a step back and reassess their marketing plan and growth goals to adjust for the unseen impact of a global pandemic. Though, that doesn’t mean 2020 is a wash. In fact, now’s the perfect time to plan for early 2021 growth.