2012 Annual Franchise Development Report Now Available

Last year the headline on our Annual Lead Generation Survey story in Franchise Update magazine read: "Adapt or Die." Responses to two new survey questions this year indicate franchisors have taken this lesson to heart.

In responding to the question, "Do you believe the fundamental lead generation process used before the recession must be changed to effectively recruit today's buyers?" three out of four (77 percent) said Yes. And to a similar question about the franchise sales process, 74 percent said Yes.

"Don't wait for the recruitment environment to change. You need to change your approach to succeed in this environment," said Franchise Update Media Group President Steve Olson, who unveiled the results of the 14th annual survey at the Franchise Leadership & Development Conference in October.

This year's survey gathered data on sales and recruitment practices from 110 franchisors representing 109,936 franchised and company-owned units (79,254 franchised and 30,682 company-owned). Participants consisted of franchisors who registered for the conference and filled out the forms of the in-depth survey. The responses--which are analyzed to provide an in-depth view into the recruitment and development practices, budgets, and strategies of a wide cross-section of franchisors--provide the basis of this, our Annual Franchise Development Report (AFDR).

"It's not just catching up with where you were before," says Olson. "If you have 30 percent fewer buyers in the market, you have to improve your recruitment performance." Today's potential franchisees, he adds, are asking not "How much can I make?" but "How fast can I get to ROI?" And franchisors better have a good answer, or those prospects will find another brand that does.

Many of the changes in the recruitment environment, of course, are the result of the economic shifts of the past few years. "The impact of the recession on the buyer has created caution and shrunk the pool of buyers, so you have to get a much larger slice of the pie to continue to grow--or fish in different ponds," says Olson. "There are fewer buyers in a shrinking pool, and we don't know when it's going to change, so we have to change our processes to more effectively target our audiences."

This is not simple. It means, among other challenges, overcoming the fear factor in buyers, the ongoing lack of financing, more attention to unit economics and validation, and increased use of technology tools to monitor and quantify results of lead generation and the sales process. "It's not the go-go days any more, so measurement is more necessary than ever and the tools are improving every year," he says. Compounding the challenge, he adds, there have been more closings of franchise units in recent years, so brands first have to catch up before they can grow.

One way to fish in new ponds is to expand your pool through outbound prospecting. "This has never been done before, it's always been inbound," says Olson. Examples include calling on local chambers, attending industry trade events, and exploring vertical markets. Fishing in vertical markets involves learning the characteristics and traits of your most successful franchisees and going where they go, finding people in vertical industries with the same skill sets.

Growth plans for 2012 among respondents target a total of 8,262 new franchise units and 4,441 new franchisees; that compares with 3,850 new units 3,100 franchisees targeted for 2010. To hit those goals, says Olson, franchisors will have to provide a compelling business opportunity, which involves strong unit economics, transparency in Item 19 (including costs, as well as sales numbers), and refining their recruitment process to match what potential franchisees are looking for, not only in content and tone, but also in using every available channel to present their offer.

Next time: Highlights from the 2012 AFDR, which will include the following categories from the survey: Recruitment Budgets, Where the Money Goes, Internet Spending, Top Sales Producers, Top Internet Sales Producers, Online Alternative Resources, Social Media Deals in 2011, and more. Too curious to wait? Read the complete story, which appeared in the fourth quarter issue of Franchise Update magazine now.

The complete report, with analysis and benchmarks, is available for $399 ($299 before 12/31/11). For ordering information, contact Sharon Wilkinson at 800-289-4232 x202 or sales@franchiseupdatemedia.com. You also can order online.