2020 AFDR: How Do You Measure Up? Part 3, Budget & Spend vs. Effectiveness
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2020 AFDR: How Do You Measure Up? Part 3, Budget & Spend vs. Effectiveness

2020 AFDR: How Do You Measure Up? Part 3, Budget & Spend vs. Effectiveness

Results from the 2020 Annual Franchise Development Report (AFDR) were unveiled in late October at the 21st annual Franchise Leadership & Development Conference (FLDC). The 2020 AFDR is based on responses from 122 franchisors representing 30,119 units.

Participants consisted of franchisors that completed an in-depth online questionnaire. Responses were aggregated and analyzed to produce a broad picture of the recruitment and development practices, budgets, and strategies of a wide cross-section of franchisors. The data and accompanying commentary and analysis provided the basis of the 2020 AFDR.

Highlights from the report were presented at the conference by Franchise Update Media CEO Therese Thilgen and Executive Vice President and Chief Content Officer Diane Phibbs. This is part 3 of 6 on some of the report's major findings.

Ordering information can be found here. (Conference attendees received a complimentary copy.)

2019 Spend: Budget vs. Effectiveness

In a departure from previous years, where the AFDR measured "where the money goes" by category (digital, print, etc.), this year we've calculated the effectiveness of that spending by category. The graph, showing the weighted average of budget versus effectiveness, provides a good picture of what's working. Based on this new data set, Phibbs had several observations:

  1. Lead attribution is really important. To make better, more informed decisions on how to spend their franchisee recruitment dollars, brands should know how each prospect first learned about them. While prospects may not be 100 percent certain themselves (radio? billboard? a friend?), it's important to ask them, both during the initial call with qualifiers and on subsequent calls with sales executives. Take print, for example, which is showing itself as effective as other media, but is difficult to track without those conversations.
  2. Digital is not as effective as it seems, but it is easy to track. Although many franchisors reported that a lead came from its franchise opportunity website, that can't be the source. A prospect must have first learned about the brand elsewhere and then visited the website.
  3. Brokers remain an effective, but costly lead source, according to respondents. "In previous years, the AFDR didn't track brokers in the budget breakdown," says Phibbs. "It was our understanding that the franchisee recruitment and management fees were paid out of the portion of the franchise fee brokers take and were not a recruitment budget line item. We're learning that this either has changed or hasn't been the case. Many franchisors now include brokers as a line item in their recruitment budget. We'll be updating the AFDR survey to include this in the future."
  4. Referrals, at 36 percent, are the second-highest sales producer. Many franchisors have instituted a formal referral program for franchisees, offering cash rewards, discounts, or other incentives. Do you have a program for internal franchisee expansion and referrals? What about with your vendors and other stakeholders or partners?
  5. Most important, are your franchisees happy and successful? No one sells better than a happy franchisee!

2019 Spend: Budget vs. Effectiveness

Published: January 6th, 2020

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