Want to Sell More Franchises?: Stop Selling Franchises!

When discussing franchise development best practices at events such as the recent Franchise Update Leadership & Development Conference, you heard franchise professionals throw around terms such as "franchise sales," "franchise development," and "franchisee recruitment." If you were to examine their core philosophy on how to best expand a franchise network, you would find professionals seem to fall into two separate and distinct camps: Franchise Sales and Franchisee Recruitment. Both parties maintain their philosophies are right.

In this article we distinguish the differences between these philosophies, and see which philosophy produces the best results and is most consistent with the long-term, best interest of franchisors and franchisees.

Distinguishing a Recruitment Philosophy from a Sales Philosophy

Recruitment Philosophy

  • Franchisor selects only those candidates who both match the franchisor's profile of successful franchisees and whose objectives can be met with a high degree of probability using the franchisor's business model.
  • Franchisor focuses on whether or not candidates are a match for both the business and corporate culture.
  • Franchisor focuses on recruiting quality franchisees.
  • Franchisor seeks to eliminate potential failures by either denying marginal candidates a franchise or having a plan to mitigate both candidates' and franchisor's risk.

Sales Philosophy

  • Franchisor sells franchises to all candidates who demonstrate a willingness and financial ability to purchase one.
  • Franchisor focuses on whether or not the candidates will buy the franchise.
  • Franchisor focuses on recruiting a quantity of franchisees.
  • Franchisor seeks to maximize growth by accepting marginal candidates and turning a blind eye to additional risk.

Which philosophy makes the most business sense?

To answer this, you have to believe that being a franchisor is a business unto itself. In the business of franchising, franchisors typically generate revenue in either two or more of the following ways:

  • Franchise fees
  • Royalties (continuing fees)
  • Product purchases
  • Ancillary fees (technology fees, marketing fees, transfer fees, etc.)

When asked "Which of these revenue streams are most important?" most franchisors would indicate "royalties" or (with some franchisors) "product purchases." In other words, franchisors are in it for the recurring revenue streams, however these streams are generated.

Therefore franchisors are ultimately all in the same business: recurring revenue collections.

Now think about which franchisees make the greatest recurring revenue contributions. Aren't these the most successful franchisees?

Then think about which franchisees consume the greatest amount of the franchisor's time, money, and Aren't these the least successful franchisees?

Last, think about which franchisees subsidize the time, money, and franchisors spend with the least successful franchisees. Again, aren't these the most successful franchisees?

Successful franchisees pay the most, consume the least, and validate the concept the best to franchise candidates. They are both the franchisor's high-margin repeat customer base and ambassadors for the brand.

Conversely, unsuccessful franchisees pay in the least, consume the most, and validate the worst. They offer the franchisor a low margin at best, or if the franchisor costs it out they may actually be losing money. Not all recurring revenue dollars have the same margin. Not all franchisees are ambassadors to the brand. Franchisors with a franchisee recruitment process are more likely to identify and screen out potential weaker performers than those managing a franchise sales process.


Which is best for closing more deals?

If you are a franchise salesperson, think about the last couple of franchisees you brought on board, and then ask yourself the following question (And if you are not, ask someone who is): How would you describe your relationship with these candidates?

Can the relationship best be described as a "transactional relationship" where the franchise salesperson is the seller and the candidate is the buyer? Or does it transform into something else? When I ask this question at programs we run or at franchise development forums we moderate, I often hear such descriptors as "I was a facilitator," "helper," "advisor," and never do hear "I was a salesperson."

When I ask, "When do you feel like a salesperson?" after a brief pause, they usually answer, "When I am chasing them," "When they don't trust me," and "When they aren't interested." In other words, they find themselves selling when candidates aren't buying. Put another way, selling is what occurs when the recruitment process is breaking down. Put even in simpler terms, selling is a failed strategy.


Which is best for corporate culture?

Franchisors that rigorously protect their brand and corporate culture by recruiting only candidates who are a fit from both the franchisor's and franchisees' perspective, create a greater demand for the franchise. In other words, quality generates quantity. These forces work in synergy, not in opposition. But quality always comes first. Recruit the best and you will soon find that you are recruiting both best and most. Look at McDonald's. Do they have a problem locating qualified franchise candidates?

Let's use residential for example. Think about a town in your community that people aspire to live in. It probably possesses low crime, great schools, concerned parents, tons of activities for kids, good restaurants, and a community of residents who actively work to keep it that way. And because the community takes responsibility to create and maintain their community, people want to live there. There are many buyers for few houses, so houses maintain their value better and sell quicker than in surrounding areas (even in this economy). Conversely, what happens to a community when it becomes overcrowded and overbuilt?

Scott Peck in his seminal work "The Road Less Traveled" said that group behavior is always designed to maintain the existing group behavior. Applying this theory to organizational behavior, one could say, "Corporate culture is always designed to maintain the existing corporate culture." Put another way, you need to intelligently design and diligently protect the corporate culture early. If not, you will be slamming your head against the wall midstream. If you have such a culture, the franchisees will work with you to protect it. If you don't, at least for a period of time they will work against you to create change.

Ultimately, the franchisor and franchise candidates want the same thing. The franchisor desires to cultivate a community embracing success, personal responsibility, and rock-solid franchisee-franchisor relationships. Franchise candidates want to join such a company. The culture becomes a key recruiting and differentiating point that propels the organization forward.

Organizations that readily accept those who desire to join, without concern for culture, personality, or quality of relationships, seldom get there.


Which is simply the right thing to do?

About 10 years ago, several seasoned franchisee recruiters from different franchise companies were sitting around a table at the IFA Convention discussing franchisee recruitment philosophies.

A regional director of franchise sales we will call Jim said he examined franchise candidates as if he were making a key hiring decision. He looked at the demands of the role the franchisee plays in the business and made sure the franchise candidate possessed the requisite skills, background, and capitalization to win by the candidate's definition of winning.

Bill, a vice president of franchise development for a large national chimed in, saying he takes a different approach. "It is not my job to qualify anyone. As long as they have the money, I will give anyone their 'God-given right' to fail." He thought it was his job to pick up franchise fee checks from anyone willing to cut one, regardless of the candidate's business qualifications. He absolved himself from any personal responsibility of how the franchisees he recruited performed.

Later in the same conversation, Bill complained about not being able to find a qualified secretary for his department. Jim sarcastically offered, "Why are you making this so hard? Just go to the unemployment office, grab the first person you see, and give them their God-given right to fail."

Apparently, Bill wasn't much into honoring others' God-given rights if it negatively affected him.


Making the switch

If you are currently operating from a sales philosophy and desire to make fundamental change, here is what you need to do.

Educate your recruiters in good interviewing technique. Make it your personal goal to know your candidates better than anyone else. Practice being crystal clear on such things as their transferable skills and experience, finances, monthly living expenses, spousal support and how they define winning. Don't stop at a high-level understanding. Drill down into the core of who they are and find out what they want their lives and careers to stand for. Develop a solid profile of a successful franchisee. Design a process where both you and the candidate work together to determine whether or not your franchise is a fit.

Before each conversation with the candidate, think about how the attributes of the business relate to the needs, goals, experience, and capital of the candidate. Help them see whether or not your business is the right solution for actualizing the life they desire for themselves and their families.

Shoot straight
Practice having genuine and authentic conversations with your candidates. Let your guard down and you will find they let their guard down too. If you have a concern, voice it. You will then find if they have a concern, they will voice it too.

In summary, you can see that "franchise sales" is a distinctly different approach than "franchisee recruitment." When these approaches are compared side by side, franchisee recruitment appears hands-down a better approach to building a long-term, sustainable franchise organization.

Joe Mathews, founder of the Franchise Performance Group has more than 20 years of experience with national chains including Subway, Blimpie, and Motophoto. Today he specializes in franchisee recruitment, franchisee performance, and franchisee-franchisor relations. He is a highly rated speaker on topics relating to franchising and human performance, a regular presenter at IFA conferences, and an instructor with the Institute of Certified Franchise Executives. He also has authored two books: "Street Smart Franchising" with Don Debolt and Deb Percival; and "Meaning of Life Project."

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