Moving the needle
How to get the most out of your leads
While close rates in franchising are among the lowest of any sales profession, they are not immovable. But to increase those sales, it’s important to “inspect what you expect” on a regular basis.
Perhaps the most pressing question for new and established franchisors alike is: "How many franchises can I expect to sell?" When faced with that question, many franchise veterans will have a tendency to oversimplify. Franchise sales are predictable, they will say. Advertising generates leads, and a certain percentage will close. So the more gas you put in the tank, the farther you can drive.
But while some industry pundits (including myself at times) will throw around "average close rates" and "cost-per-sale" as if they were dogma, some franchisors will significantly outperform those averages while others will fail to achieve them. So how are they able to achieve this increased fuel economy?
First, like all averages, it is important to remember these statistics represent a middle ground around which average performance will cluster. As such, they provide a benchmark against which to measure your own performance. But like every bell curve, franchise marketing and sales performance curves have areas off to the right where those that achieve hyper-growth and improved cost efficiency will reside.
Especially in these more challenging economic times, it is important to get the maximum productivity out of the leads you generate. So if you are a franchisor who is trying to move the needle without increasing your ad spend, how do you get closer to the hyper-growth that those select few concepts harness?
Understanding the answer to the question starts with an understanding of the five basic factors affecting franchise sales. Of these five factors – concept strength, message, media, sales proficiency and budget – the first four directly affect close rates and cost-per-sale. The savvy franchisor will optimize these four pillars as a first step.
Of the factors affecting close rate, the most important by far is the concept itself. Far too many companies get into franchising before they have adequately refined their concept – and they will often suffer the consequences for doing so.
Having a saleable concept goes far beyond the existence of an established and profitable prototype – although that is, of course, a prerequisite. It goes to the "look and feel" of the operation; the credibility of management and of the concept itself; the unique market position; the value proposition and the equability of franchise structure and support. It goes to the business economics, whether the prospect derives them through their own devices or through a Financial Performance Representation provided by the franchisor, and the availability of financing. And, of course, for established franchisors, it goes to the strength of the validation provided by existing franchisees.
Of course, no concept is perfect. But when it comes to assessing how to achieve those incremental sale goals, it is worthwhile to ask whether the only way of doing so is to increase the ad spend. If, for example, the concept itself is tired, is the franchisor better off investing in incremental advertising – or perhaps a unit redesign? If your franchisees are not validating well, is the franchisor better served in spending to address the areas of concern, or should they simply increase their ad budget and try to slug their way through these issues using brute force? In making these decisions, it is important for the franchisor to remember that moving the needle incrementally on average close rates or costs-per-sale can have a greater impact in the long run.
Well written ads provide the first point of contact with the prospective franchisee, and they must differentiate you from the thousands of other franchise opportunities in the marketplace if you are to hope to thrive.
Hire a good marketing or consulting firm. Far too many franchisors rely exclusively on the founder's intuition, and never take their message to the next level. It is surprising how few franchisors test ad and media performance. The savvy franchisor systematically tests different ads in different media and measures their effectiveness using cost-per-lead (and, ideally, cost-per-qualified-lead) statistics.
Your message also needs to be communicated – usually in much greater detail – in your franchise collateral material. While the dawn of the Internet Age has seen some franchisors ignoring printed material for the reduced expense of electronic marketing, franchisors with the highest close rates generally spend as much time and money on print materials as they do on their Web site.
Generally speaking, the younger the franchisor, the better these marketing materials should be in an effort to increase their level of credibility.
As part of developing the message, the franchisor needs to have a strong understanding of their prospective franchisee – and the media that the franchisee is likely to frequent – if they are to generate franchise sales at an accelerated pace.
While the most effective franchisors will use their intuition as a guidepost, they will augment that intuition with research. Surveys of franchisees and prospective franchisees can yield incredible insight into how and where the franchise can best be marketed. And the best franchisors will consistently measure empirical cost and performance data on each of the various media that is employed for lead generation.
Finally, the franchisor needs to be certain its franchise sales process is getting the most out of existing lead flow. That starts with hiring the best franchise salesperson you can afford – and perhaps acknowledging that franchise sales may not be among your existing skill sets. While many franchisors will initially act as their own internal sales force, if the want to get aggressive, they will often fire themselves in favor of experienced franchise sales professionals.
In this process, sales management becomes vitally important. It is all too easy to allow your franchise salespeople to have free reign over these leads and simply accept their excuses for sub-optimal performance. Ineffective salespeople may choose to cherry-pick the best leads, perhaps to the detriment of less effective (but nonetheless important) lead sources such as the Internet. We have seen many franchise salespeople who will do the phone work, but fall short on the documentation side. Or salespeople who, quite simply, are not cut out for the low-close rates and high-level of follow-up that are crucial to higher close rates.
In franchise sales, it is important to "inspect what you expect" on a regular basis. Mystery shop your sales force to be sure that calls are being made and that your sales processes are being followed. Listen to their sales pitch to ensure it conforms with the message that best communicates your value proposition. Review your sales practices to be sure you have squeezed all of the air (and unnecessary steps) out of the process. Regularly review documentation in your contact management software (including leads that do not make it to Discovery Day). Properly train your sales force. And, of course, measure each salesperson's productivity in terms of criteria such as close rates, application rates, time to close, and, to the extent that lead flow is not an issue, performance indicators like calls-per-day.
Ultimately, spending more money on franchise advertising is not always the best solution to improved franchise sales performance. While close rates in franchising are among the lowest of any sales profession, they are not immovable. So to really move the needle, examine the efficiency of your engine before you add more gas.
Mark Siebert is the chief executive officer of the iFranchise Group (http://www.ifranchisegroup.com/), a franchise consulting firm with consultants who have worked with 98 of the nation's top 200 franchisors. Mark can be reached at 708-957-2300 or at firstname.lastname@example.org.