2024 AFDR Data - What To Know About Franchise Resales

Franchise Update Media has been researching franchise lead generation and franchisee recruitment processes for more than a decade. An annual in-depth online survey queries franchise development professionals about a number of issues related to their lead generation and recruitment strategies.

All the responses are collected, aggregated, and analyzed to produce a detailed look into the recruitment and development practices, budgets, spending allocations, and strategies of a wide cross-section of franchisors. The results are presented each year in the Annual Franchise Development Report (AFDR), which can be ordered online at afdr.franchiseupdate.com.

The 2024 AFDR report is a valuable resource that can provide crucial insights on franchise development, lead generation, and recruitment best practices. It’s the kind of information that can help brands assess what they are doing right, and what needs improvement.

This is part of a series of articles that will draw out a few important insights from this year’s AFDR in upcoming issues of the Franchise Leadership & Development Report. It’s hopefully the kind of information that can give you an edge in your lead generation and recruitment efforts.

For perspective, this year’s study surveyed 120 brands. The franchisors had 2,533 company-owned units and 24,101 franchise units. The brands represented a variety of segments, including food, retail food, nonfood retail, brick-and-mortar service, and service based on population and territory.

The importance of franchise resales

Although a major focus of franchise development is adding more locations in new or existing markets, an overlooked aspect can be in franchise resales. Franchise owners come and go for many different reasons. Whether it is maintaining a successful business or turning around an underperforming operation, it is important to replace outgoing franchisees of existing locations with qualified candidates coming into the system.

Sources of resales

Respondents to the AFDR were almost evenly split when asked if they had programs to recruit buyers for transfers/resales, with 49 percent saying they did. The most popular method of franchise transfers came from new buyers (76 percent), followed by existing franchisees within the system (69 percent). Seventeen percent indicated they get franchise transfers from franchisees with another brand.

Development team involvement

Ninety percent of the franchises surveyed said their development department is involved in transfers/resales, with 61 percent saying they had a formal resale program in place to support those transactions. Although the development teams are actively involved in the process, having a written plan in the Franchise Disclosure Document was more split. Fifty-five percent said they did not include a resale/transfer agreement in their FDD.

Amount of annual resales

Even with considerable involvement from the franchise development teams in the process, resales comprise only a small amount of a franchise’s number of overall units. Seventy-eight percent of the survey respondents said that franchise resales represent five percent or less than their total number of operating units. Twenty-nine percent said they accounted for less than one percent of their total units, with 25 percent indicating they were 4-5 percent, and 24 percent saying they comprised of 2-3 percent of their territories.

Seventy-nine percent of the survey respondents said this was a higher percentage than normal due to the lingering impact of the Covid-19 pandemic.