A Candid Conversation With Franchise Consultant Lori Kiser: How Brands Should Spend Their Development Budgets in 2020

With a background that includes the titles of franchisor, vendor, franchisee and president of one of the largest franchise consultant-broker networks in the country, you’d be hard-pressed to find a person more well-versed in the franchising space than Lori Kiser. In her consulting work, Kiser focuses on generating profitability and sustaining a brand’s long-term value; 1851 caught up with her to learn more about where she advises franchise brands to direct their development budgets heading into 2020.

1851: Where can franchisors lighten their budgets or remove spending from?

Kiser: That’s a joke, right? The franchise world is highly competitive—there are now over 3,000 franchisors, unemployment is at a record-setting low, the gig economy is rising and business ownership doesn’t seem that important to the generations coming after the Baby Boomers. The trend year-over-year is that you must spend more, not less, to successfully recruit franchise candidates. Invest and grow your system or engage in an exit strategy.  

1851: What's the biggest trend you're seeing when it comes to franchise development budgets and spending?

Kiser: The biggest trend for franchisors’ development budgets has been strengthening the reach and exposure of the franchise recruiting website. I believe the two main reasons are that although Baby Boomers seem to be holding the lead when it comes to who’s becoming a franchise owner, Gen X is gaining on them, and in a few short years, will become the largest group of decision-makers. They tend to mistrust salespeople and prefer to do a large portion of their research online before engaging. 

The second reason [for increased investment in franchise development websites] is the amount of data and information about the franchise industry, business ownership and different brands widely accessible online. Franchisors must be able to meet the potential franchisee (Gen Xers) where they live—this means providing practical, straightforward and relevant information about their system using online search, social media and online reviews, as well as video testimonials.  

Successful business ownership isn’t easy, so those franchisors that are sharing only their top franchisees saying how wonderful the world became after becoming part of a system is unrealistic and not authentic—being genuine and transparent will win the day.

 1851: What's an area in which franchisors commonly overlook or spend too little? 

Kiser: The industry is filled with many new (and not-so-new) franchisors that are seriously undercapitalized. For the franchisor, the road to profitability is a long game and it will take patience, experience and cash to hit the royalty self-sufficiency mark. Don’t be fooled by anyone who tells you that you just need an FDD to start franchising—not only has franchise recruiting become more complex, it is also now much more expensive.

1851: Where do you advise franchisees to spend their marketing budgets on the local level?

Kiser: Customer acquisition is key. As the former owner of a 100-plus unit franchise system in the non-food retail space, if I could go back and do it again, I’d find a way to get every new franchisee to focus heavily on sales. We shouldn’t forget that most new franchisees come from corporate America, and though they may have a lot of “business experience,” it’s typically been some time since they were directly selling to customers. Yes, marketing and sales are closely tied, but at the end of the day, the first years of any business should focus more on sales by applying a revenue-generating and profitable sales practice.   

One more thought to share with franchisees: Beware of the franchisor that advertises “absentee ownership.” Ask any highly profitable and successful business owner if they spent their first years “absent” and they will roll their eyes and laugh. It’s uncommon for any start-up small business, franchise or otherwise, to be anything less than full-time until they have developed a high-performing team, which if done right, should lead to a strong and profitable customer base.

Lastly, it is the franchisor’s responsibility to instill a culture of strong unit-level economics as the most important facet to every stakeholder in a franchise system.