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In the franchising world, there’s often a disconnect between what franchisors prioritize and what drives franchise sales. The buzz is always about selling more franchises. Yet, when the topic shifts to improving training or nurturing franchisee relationships, the room goes silent.
This is a critical misalignment. The most potent strategy for selling more franchises is ensuring your existing ones are not just surviving but thriving. The number one key to selling franchises is having successful, profitable franchisees who will tell potential franchise owners, “I am successful, and this is a great franchise to own.” If your franchisees are not successful, and you’re having trouble selling franchises, stop selling franchises and invest in your system.
The average potential franchisee is going to call between five and seven current franchisees to get a referral. It takes only one negative referral call to kill the deal. The misery index is the likelihood that a deal is going to die because the potential franchisee gets one or more negative reports.
According to a 2023 survey by Franchise Business Review, 32% of franchise owners are unlikely to recommend their franchise to potential new owners. In addition, 83.6% of the time a potential buyer is considering your franchise you will have to overcome a bad reference. That’s the misery index.
Potential owners will rarely tell you they’re not buying because of bad reviews. They ghost you or make up excuses.
Many franchisors will give potential buyers a list of franchisees to call—franchisees they know are going to say good things. If you believe potential buyers are only going to call those franchisees, I have some swamp land to sell you.
The fundamental key to selling franchises is to have successful franchisees. I want you to note that I did not say happy franchisees. Your goal should be to have your franchisees be financially successful. Typically, this will make them happy, but a certain set of franchisees will not be happy. Perhaps that is because you push them or prod them to do things they do not like. However, an unhappy, highly profitable franchisee is going to give you a good referral. They’re going to say, “I’m doing really well financially, but I would like it if the franchiser was more flexible.”
If that is what your franchisee says, the prospective franchisee will focus on, “I’m doing really well financially.”
Many franchises are led by leaders who are appeasers. Their goal is to make everyone happy, but they won’t create the standard of excellence necessary for the franchise system to be high-performing. This will lead to happiness, but not profitability and not great references. They will say, “I really like my franchisor, but I’m not making a lot of money.” That is not the kind of validation you want.
A great franchisor knows how to lead with vision, push people beyond their comfort zone in a positive way, and create an economic model that is highly profitable. Even then, there will be some franchisees who are not happy because they’re being pushed out of their comfort zone.
It’s a sad fact that most franchisors do not invest in the systems and support necessary to give their franchisees the tools to be financially successful. Here are the key things you need to have and do well:
By focusing on these pillars, selling franchises becomes less of a sales pitch and more of a natural progression. Your existing franchisees will validate your system and become your most compelling sales agents. A network of profitable, successful franchisees is the best sales strategy you could ever have.
Evan Hackel is CEO of Ingage Consulting and Delta Payment Systems and an advisor to Tortal Training. He is an author, speaker, and entrepreneur who has been instrumental in launching more than 20 businesses and has managed a portfolio of brands with systemwide sales topping $5 billion. He is the creator of Ingaged Leadership and author of Ingaging Leadership Meets the Younger Generation. Reach him at ehackel@ingage.net, 781-820-7609, or evanhackelspeaks.com.