Who’s the Boss? Understanding the franchise sales process
As a new franchisee, it’s important to know the strategies and motivations behind the franchisors trying to sell you their concepts. Certainly, there’s a right way and a wrong way to conduct franchise sales. Robert Gappa of Management 2000 has some tips to help you recognize a franchise salesperson who has chosen the former.
Gappa isn’t saying franchise salespeople are like used-car salespeople. He’s saying they should be more like new-car salespeople.
“Franchisees (should) see franchisors as car dealers with service departments,” says Gappa, the president of Management 2000, a firm specializing in helping companies to grow through franchising, and which also provides CFE training for the International Franchise Association. Prospects want someone to not only put them in the driver’s seat, but to ensure their vehicle stays tuned and maintained to deliver them where they want to go.
The analogy ends, however, when it comes to taking possession of the vehicle. Car dealers can sell you a car, but a franchisor isn’t “selling” a franchise. Just like residents of Boulder, Colorado, are not “dog owners” (they’re guardians of their four-legged friends), franchisees do not “own” their franchises. They have been granted or awarded the right to use the franchisor’s system and marks (their intellectual property), Gappa says. This may seem like merely semantics, until the day the franchisee decides to “sell” his franchise and finds he has few rights in transferring ownership, Gappa contends.
Gappa drove this point home during a conversation with Franchise Times at a recent franchise expo, where he says the franchise “sales” process backfires for the franchise community.
“What people market at shows is what they have,” such as a proven system or a brand, not what they can do for you, he explains. Which is akin to an auto dealer advertising that their cars have wheels and a functional brake system. In other words, we’d all be in trouble if they didn’t come with those basics.
Instead of telling prospects to “be your own boss,” companies should be touting their ability to do a better job of attracting and keeping customers than their competition, he claims.
To carry that analogy further, he recommends that franchisors imagine their salespeople as a car dealers. He or she spots a woman walking in with two toddlers in tow. Is the salesperson going to walk her over to the Mercedes convertibles? Probably not. The same holds true for a 55-year-old, gold-chain sporting man with a comb-over. “He’s probably not going to buy a minivan,” Gappa says. So why not steer the customer to the vehicle that best suits their lifestyle and income?
“Each car has a profile,” Gappa says, and car dealers market to what their customers want in their lives.
Franchisors can come up with the same profile by finding out the answer to several lifestyle-based questions:
1. Where are you today in your goals for income, lifestyle, wealth building and debt?
2. What are your goals 20 years from now? For instance, how much income do you want/need to live?
3. Can you achieve your goals working where you are today?
“If the answer is no, then we need to talk about if our concept can get you there,” he says. But the other side of the coin is that if “our concept” can’t enable you to achieve your goals either, a deal shouldn’t be struck. “The job of the sales guy is (to be a) headhunter,” he says.
You can’t always do what you want
Another part of the process is to prepare people for the reality of being a franchisee. “You have to let people know there are things they have to do that they don’t want to do—but have to do because that is what the agreement says,” Gappa explains.
In this case, think about other people working with licenses. For instance, as a commercial pilot you may want to have a vodka and tonic before heading off to fly your plane, but according to your license requirements, you can’t. And if you do—and you’re caught—your license may be taken away.
If everyone focuses on the customers, he contends, the system will be much stronger. “A franchisor needs to be customer-centric, not money-centric, not franchisee-centric,” he says. “When franchising started it was all about customers. Franchisees are not your customers.” They are, however, an integral part of the franchise. A winning franchise strategy, he adds, is to attract more “promoter customers” to the existing units.
Gappa admits he’s been on a campaign for 26 years to eliminate the word “sales” from the franchise granting process. He acknowledges that it may be a tough ... um, sell.
“One year I ran a seminar without ‘sales’ in the name and no one came,” he admits. The same seminar with the moniker, “How to Recruit Better Candidates and Close More Franchise Sales,” however, is a six-times-a-year event.
Treat me like royalties
Franchise grantors aren’t the only people Gappa has advice for: Franchisees also need to have a mind-shift concerning royalties.
When a franchisee signs an agreement, he or she is acknowledging the use of the franchisor’s brand to attract customers. So when it comes time to pay royalties, the franchisee has no other option, he says. “You don’t ‘owe’ it to us (the franchisor), it was always the franchisor’s money,” he says. What is earned after expenses and royalties, is the franchisee’s share of the customers’ money.
“The day I think I can make that amount of money without the franchisor, I should leave,” Gappa says. Which is why franchising is a relationship—and both are depending on the other one to service customers. That’s why franchisees aren’t the franchisor’s customer; royalties are the franchisor’s contractual right and customers are king.