The Golden Rule of Franchise Sales

Mark Siebert

Date

Mar 02, 2018

One of the first questions an emerging franchisor asks is “how many franchises can I sell?” A valid and expected question. But, the problem is, emerging franchisors should be asking themselves “how many franchises should I sell?”

While both questions are crucial to the franchise sales discussion, each come with their own definitions. “How many franchises can I sell?” can be answered as simply as “how much are you willing to spend on marketing?” Selling franchises is a numbers game and though that seems like an easy answer, in theory, selling franchises should be easy. If you’ve put in the time and effort upfront to position your franchise offering at the top of the market, the sales will come.

Here are some things to keep in mind when determining how many franchises you should sell, despite knowing how many you can.

Franchising by the numbers

Franchise data suggests that, on average, one out of every 100 franchise leads will qualify for your offering. Extend that statistic across a goal of say, five franchise sales in the first six months, and you’re looking at generating a minimum of 500 leads in a short amount of time. To get there, you have to spend money. Currently, the franchise industry’s marketing ratio sits right around $8,000 per franchise sale, and the evidence speaks for itself. Spend money, sell franchises. But, existing franchisors know that it’s not that simple. That’s why a closer examination of the sales process reveals something interesting.

There are five primary factors that influence franchise sales success: concept, planning, messaging, marketing spend and sales process. Putting aside issues of territorial capacity and financial influences, these five factors will determine a franchisor’s ability to sell.

Of course, the most important factor in franchising is the concept itself – and there are dozens of factors within the scope of the concept to determine its “salability.” Is the concept well-designed and adequately proven? Does it have brand “sizzle” and, ideally, a well-targeted audience? Is it readily replicable? Is the investment reasonable? Does it offer strong returns? The answer to these questions should tell the franchisor whether they have anything to sell in the first place. Without a salable concept, the rest of these discussions are moot.

But, assuming your concept is salable, there are other questions to consider. Most importantly, how many is too many? We all know the goal of a franchise program is to grow a concept as far as the market will take it. In reality, it’s a little more complicated when you get into the question of how many franchises you should sell.

While the pre-sale process – the marketing, audience development and execution – will get the ball rolling, it’s the post-sales process that determines the “should” portion of the can vs should argument.

Post sale celebration

Top franchisors know that the key to their success rests in the success of their franchisees. That’s why the most successful franchisors are selective in the sales process. A failed franchise may very well be the result of the franchisee that purchases it, but rarely do these proud business owners point the finger at themselves when a prospect asks why the concept failed. So, selectivity in qualifying leads is incredibly important, especially in the beginning. Identify red flags (like low capital, poor work ethic or an inability to follow systems) to weed out potential failures before they take root in the system. Though it sounds counterproductive, one of the best ways to sell more franchises is to sell fewer franchises.

Once the sale is made, the franchisor needs to be sure that they provide the franchisee with the training and support they need to be successful. This training and support requires time, effort, resources and long-term commitment. It’s not hard to find examples of failed support systems, which are often the result of franchisors allowing the sales process to outpace their ability to provide meaningful support to their franchisees. Losing credibility from existing franchisees is more than just a failure within the operating units; it’s an upfront failure for future growth as well.

Remember, the most important aspect of the front-end sales process is the concept itself. But, coming in at a close second, is a healthy franchise system. Today’s franchise buyer is more sophisticated than ever before, with a slew of highly advanced research tools at their fingertips. This makes conducting thorough due diligence on a particular concept easier than ever. So if a significant number of your existing franchisees are unhappy, that information will be readily available to your prospects, and will likely hold heavy influence in their decision to move forward with your concept.

If you lose the luster of your concept and your credibility is called into question, the road ahead is going to get bumpy. On the surface, it may seem like the pre-sale process is where your priorities should lie, but don’t be fooled – a poor post-sales system can have significant impact on your franchise sales momentum.

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