Franchise Validation: Building Proof Your Franchise Works
As a new franchisor, you have virtually no validation. It is the single greatest obstacle you face in convincing potential franchisees that your system offers value and opportunity for them. Larger franchisors such as Jimmy John’s, Visiting Angels, or Anytime Fitness have so much validation they don’t need to spend much on marketing for new franchise recruitment because their validation produces consistent organic lead flow for the franchise brand.
What is validation?
Validation is supporting evidence for your franchise value proposition. Every franchise presents some unique selling proposition to the potential buyer….training, support, marketing, territories, branding and other benefits to a franchisee could be examples. Validation is the proof that these USP’s actually exist and that people who bought into the system experienced them firsthand. From a higher level, franchise validation is the overall success rate of the business model. Great franchise brands boast a franchise unit closing rate of less than 1%, which certainly validates the decision to purchase one of these brands over other franchises or over starting a business on your own as an entrepreneur.
How do you get franchise validation?
A franchise gains validation as it replicates success and happy franchisees in the growth process. Franchisors who have consistently strong marks in this area tend to look at their franchisees as customers. They respect their opinion, the relationship and are driven to serve the franchisee and maximize their customer experience with the franchise. It starts with the first franchises sold. A new franchise system can have strong validation if the first two units have raving reviews for the value they received as part of the franchise investment. Although buyers prefer larger volumes of examples, if the ones who have made the buying decision check out and are willing to offer praise to the franchisor, even a handful of units can prove to be effective. As the system grows, the dynamics evolve for what constitutes maintaining solid franchise validation. Larger systems must manage elements such as franchise conflict disputes, vendor negotiations, marketing fund initiatives and other larger scale objections relevant to a system with 50 or more units.
How do you use validation in the sales process?
It is critical to use your most valuable resource carefully during your sales process. A happy, successful franchisee needs to be protected from unwarranted reference calls and wasted time with buyers who weren’t really that serious. Positioning the validation call as something important, significant and as a sacrifice for the franchisee will help in limiting the amount of unnecessary calls. Regardless of what they tell you, your franchisees you use for validation in the sales process will get burned out, make sure you use them only when needed. Ask qualifying questions such as, “now that we have gone through the FDD and financial requirements of the Franchise, if our reference call is to your liking, would be you ready to move forward?” If possible, try to be on the call with your franchisee and the candidate, this will allow you to control the call, make sure it happens and limit the amount of time your franchisee spends on each call. Offer your franchisee thanks and some form of gifts in response for taking the time to do the calls, we don’t recommend a referral fee or monetary compensation, but some form of business value to them can go a long way and even just praise for helping you in your recruitment efforts.
Wherever your system is in the scheme of growth, franchise validation should be a primary metric for how well you are managing your growth and relationships with your franchisees. Relationships with your franchisees are paramount and carry enormous weight in this business. If you don’t have proof your franchise model works and carries value, the recruitment process becomes an uphill battle.
Industry Expert: Chris Conner
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