Final Highlights from the 2012 AFDR

In the previous three issues of FUSR, we published a high-level overview of the 2012 Annual Franchise Development Report (AFDR), followed by selections of highlights from the report: first, recruitment budgets, recruitment spending, Internet spending, top sales producers, top Internet sales producers, and online alternative resources; and last month social media, closing ratios, franchise sales performance, and data about franchisors exceeding goals.

In this final article, we provide more findings from the report, which drew on detailed responses from 110 franchisors representing 109,936 total units (79,254 franchised and 30,682 company-owned).

  • Measuring cost per lead and per sale. After years of sub-par performance, franchisors are continuing to improve in these two categories. In 2011, 72 percent tracked cost per lead, up 3 percent from the previous year; the flip side, of course, is that more than one in four still don't. Among those who do, their median cost per lead of $60 rose $6 in 2011 from the previous year. Looking at cost per sale (the more important number), 68 percent of respondents track that, also up 3 percent from 2010. The flip side here is that one in three still don't--a deficiency almost unconscionable in today's competitive, cash-strapped environment.

Some good news: median cost per sale fell significantly in 2011 among those who track it--from $10,000 in 2010 to $8,565 in 2011. "A lower cost per median sale reflects a combination of technology, measurement and better sales and marketing performance," says Steve Olson, president of Franchise Update Media Group, which publishes the annual report. Many also are using outside firms to help them manage and track their ROI on sales expenditures.

  • Referrals. "Referral programs have grown tremendously," says Olson, "not only to franchise owners, but also to suppliers and employees." As noted, referrals took the lead as the top sales producer at 31 percent, displacing the Internet as number one. This, says Olson, is due to more franchisors offering referral fees, promoting them more aggressively to franchisees, and increasing fees (or other rewards) when a referral signs on. Referrals, he says, also are three times more apt to buy than a non-referral.

"These are much stronger leads," Olson says, and the numbers back this up: at 54 percent, referrals have the highest close ratio of all lead generation sources. More franchisors are getting with the program and offering incentives: in 2011, 67 percent provided incentives to franchisees who referred prospects that buy, up 5 percent from the year before. The median referral fee of $3,500 remained level from 2010. While referrals still haven't regained their 37 percent share of sales producers (2007), the trend is clearly upward.

  • Qualifiers. In the quest to make the sales process more efficient and productive, more franchisors are turning to qualifiers to screen leads before turning them over to their more highly paid sales team. "The use of qualifiers has continued to creep upward," says Olson. Last year the number of brands employing qualifiers was 38 percent. "Forty-one percent employ one today, the first time qualifiers have broken the 40 percent level," he says. Why? Simple: It saves time and money and boosts productivity.

At last year's Franchise Leadership & Development Conference, the session on high-performance sales growth generated a flurry of questions from attendees. In a lively discussion about the pros and cons of using brokers, panelists noted that in-house qualifiers serve one of the same purposes brokers do. "The broker does a lot of legwork to qualify leads and answer all the big initial questions," said Steve Dunn, vice president of franchise development at Denny's.

Panelist JD Sun, co-founder of BrightStar Care, where the use of a pre-qualifier has been highly successful, put it more bluntly: "You don't want your sales people wiped out from stupid calls." A franchisor in the audience said, "We hire a $27,000 lead qualifier who gets $1,000 per sale. It's worth it." Qualifiers can also be outsourced, but the result is the same: better prospects and a more productive sales team.

Note: This 4-part series, highlighting findings from the 2012 AFDR, is based on an article that appeared in the fourth quarter issue of Franchise Update magazine.

The complete report, with analysis and benchmarks, is available for $399. For ordering information, contact Sharon Wilkinson at 800-289-4232 x202 or You also can order online.

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