What Are Franchise Sales Best Practices?
By Morgan Wood | Story originally appeared on 1851 Franchise. To read more of the article click here.
Franchise sales are critical to the success of the franchise itself. In selling a franchise, the franchisor provides the brand’s name, business model and any pre-established processes and reputation in exchange for the franchise owner doing business under that franchisor’s name. Oftentimes, there is an initial franchise fee required at the time of sale as well as recurring royalties to be paid to the franchisor.
Because of things like compliance requirements within the franchise industry and the vast number of franchises available to prospective franchisees, there are a few best practices to ensure the process runs smoothly.
“People should be connected, and conversations about larger expenditures should be encouraged,” said Lanny Tuchmayer, Director of Operations at Bergel Law.
Allowing prospective franchisees to truly understand the processes of the business creates the space for them to essentially sell themselves on the franchise model. Ensuring connection with various levels of the franchise network, including the prospective franchisee’s first touch point, other leaders and even current franchisees, makes this easier.
“Make these discussions a priority by compiling a list of top-performing, trustworthy, dependable and confident franchisees,” Tuchmayer explained. “Inquire if they’d want to collaborate on your business development plan and begin distributing it to new and prospective franchisees.”
Creating a program that includes the perspective of existing franchisees not only works to build the connection and provide authentic, well-rounded resources to potential franchisees, it also increases the strength of the connections between existing members of the network.
“There’s also a technology component to it,” explained Tim Courtney, vice president of Franchise Development at PuroClean. “Some candidates don’t move as quickly and don’t interact right away with a live franchise development director. So there’s an opportunity to have that candidate move through a very dedicated drip email campaign.”
Courtney added that PuroClean has had candidates open and read up to 70 emails before picking up the phone to re-engage. For prospective franchisees who are less apt to engage in person or may need additional time to consider or build resources, strategic email drips can provide that connection that will ensure they do not become completely detached.
Be Transparent and Upfront
“Nothing is sold by hiding behind closed doors,” Tuchmayer said.
Alex Haley, co-founder of YardsNearMe, added, “Prospective franchisees will often look to a franchise’s development website first to learn more about the brand… You must have a development website with buyer-friendly information. We all know that individuals research businesses for months, so provide them the opportunity to learn about your brand on your website, whether it’s through franchisee stories, videos or links.”
Developing a professional environment both online and in the office is critical. “Unavailable CEOs are sometimes a deal-breaker for someone willing to invest a significant amount of money in your firm,” Tuchmayer explained.
Part of providing this information includes honesty about the requirements to franchise with the brand. Michael Andreacchi, CEO of Junk King, emphasized that requirements should not be bent or skirted around.
“The requirements around capital and operational plans must be upheld. Do not make the mistake of bending on the requirements to simply sell a unit,” he said.
Courtney shared a similar sentiment and explained just how important the Franchise Disclosure Document is. “Everything in there should be discussed at one point, from upfront fees to royalty structures to territory size. If you begin to make changes to what’s in your document, you know, making special arrangements or special royalties, that always leads to trouble.”
When the Franchise Disclosure Document is adhered to and sales remain consistent, there is no room for error, misguidance or potential legal challenges down the road.
Understand What It’s Like ‘on the Ground’
Though the people involved in the franchise sales process may not be in the field every day, they should make an effort to stay involved whenever possible.
“Block out some time each month to work on the ground, in the day-to-day operations of the firm, if you really want to understand it,” Tuchmayer said. “Seeing, experiencing and speaking with the individuals who make up your company will help you understand the issues that franchisees experience, as well as the procedures that they require to achieve more profitability and success.”
While this effort is somewhat self-serving in the sense that it strengthens the franchise network, these hands-on experiences can be beneficial when working with prospective franchisees as well. Franchisees will likely want to know what daily life is like. Of course, they can be put in touch with existing franchisees, but a leader who can also share perspective provides additional value.
“A strong partnership with your franchise community always aids the ability to sell new territories,” Andreacchi said.
This experience and connection are especially helpful during franchise discovery days. Many times, if an executive is able to speak about their department and role in the business in an incredibly thorough way, a potential franchisee will not only have their questions answered but will be able to feel firsthand how involved the entire team is.
Focus On Fit
Many franchisors place a strong emphasis on the fit between franchisor and franchisee. Whether this is because of a mission that sits close to the brand’s heart or a simple commitment to selecting passionate business owners, fit can be critical.
“I think my advice, certainly to young franchisors, is to not be afraid to say ‘no’ to a candidate,” Courtney said. “There’s that one time you will let someone into your system who could really begin to burn the place down, and that’s not what you want.”
Though the decision may feel tough, Courtney said that the franchise sales process should be viewed as more of a mutual evaluation rather than a sale with no considerations. Some franchises, especially more developed ones, have grown to a position to hand out franchises to anyone who can afford them.
“I think you should really focus on that connection, build the relationship and understand what the candidate needs,” Courtney explained. “If the candidate’s needs don’t fit your business model, then it’s best to cut that candidate off early on instead of investing the time and energy necessary to involve them in the complete sales process.”Back