Anatomy of a Franchise Sale: Take It from a Pro
Successful franchise selling must employ 1) an effective and qualifying process; 2) strong relationship-building with candidates; and 3) a compelling system for closing the deal. These three triggers are universal within any franchise recruitment program.
On the buyer side, keep in mind that in understanding buyer psychology, franchisors must successfully address initial qualifying questions their candidates want answered: What is your opportunity? Is there a market for your service? What benefits can your franchise provide me? Is your company credible? How can I qualify?
I. The Four Steps
1) Determine Your Profile
2) Find Your Wow Factors
3) Formulate Your Message
4) Communicate Your Message
1) Determine Your Profile
Most franchisors work backwards: ready, fire, aim. The problem is that they create a franchise sales program process-even do their marketing for it-before they determine who they are.
When I say, "who they are," what's very important is to find the fit-to find who is the ideal candidate for your program. If you're an existing franchisor, before you even think about modifying your sales approach, you want to survey your franchisees: analyze their career backgrounds, characteristics, skill sets, aptitudes in particular areas, and their behavior styles.
If you have a franchise that is predominantly sales-driven, like a personnel service, for example, that can be a determining factor. You probably want somebody with sales background. Maybe, maybe not, but you know people skills are required.
For new franchisors, what they have to do is "sculpt" what they believe is the profile of their franchisees. That's Step 1. For existing franchisees who want to ramp up their program, what they want to do is retrofit, meaning examine their success profile: Who are the top 20 percent in their system? Who are the bottom 20 percent? That will give you characteristics, or threads, of the top producers that are going to be your ideal franchisees. Looking at the bottom 20 percent helps you determine what are some of the threads that aren't there, or things to definitely stay away from.
If you've been promoting the fact that your franchise is a very flexible business and you don't have to be there much, only to find out in your success profile that those owners are always at the store, that it's more of a hands-on operation, you're going to say, "Whoops we're promoting this thing improperly." So you first want to find the fit.
2) Find Your "Wow" Factors
Once you find the fit, you're still not ready to refine your sales process, or to duplicate what you learned in franchise training programs or at seminars. You have to first figure out what are the top attractions-I call them the "Wow" factors, or benefits, of your system that are attracting these ideal franchisees.
Survey your top producers and find out what it was about the business that attracted them. What will happen is that you'll pick up some things you've never even thought of.
There was a concept I worked with several years ago that wanted to ramp up. It was a retail service, where you can get standardized documents prepared for a half or a third the price of going to your attorney. We found out, and I was a little surprised, that there was a tremendous personal reward in the business itself. This motivating factor had not been recognized in their current recruitment approach-the personal satisfaction of the owners who could help a tremendous market of people that couldn't otherwise afford the service. And they were extremely grateful that you were there to help solve some of their business and personal needs.
At another concept we discovered a strong Wow was that the franchise was ideal for the family working in the business. It was a home-based, service-oriented operation, and had many part- and full-time opportunities and flexibility for family participation.
So you find out from your owners what the deal is, what's attractive. And you piece together this profile of reality, along with what is the perception on the front end. Again, franchisors at startup really don't know what their profile is. You can take your best guess, but then you have to adjust as you find out who your successful owners really are.
3) Formulate Your Message
After you've determined what your Wow factors are, you have to formulate your message. You want to boil it down to about six to eight, no more than that. Otherwise you're running into clutter, into diminishing returns as far as those additional motivators, those turn-ons, for the buyer. Prioritize them based on those benefits most appealing to your top group of owners. With 2,500 franchise opportunities out there today, you want to hit them in the face with your top Wow factors. You've got to grab them.
What is that message going to be that will thread through your franchise recruitment? You want to really communicate those points of differentiation, those points of distinction that set you apart.
In our coffee house, one of those, surprisingly, is a strong corporate culture-which is something that has far greater meaning today in franchising than 5, 10, or 20 years ago. We have built a very strong corporate culture that, system-wide, is aligned from franchisor to franchisee to customer, based on the feedback that we get from them and our mission statement of providing exceptional experiences to people we meet every day-at all levels. And it dovetails nicely with why people are attracted to coffee houses: it's all about the experience. That's the number one thing. It's not about price, it's about values. So we've built a mission statement around the entire structure so it has meaning for a customer, as well as for a buyer.
4) Communicate Your Message
When you have your message put together, you have to focus on communicating that clearly and consistently. Marketing and sales go together, so it's going to be on your website, through your print materials, and through what your sales execs are saying on the phone to prospective buyers. It has to be multi-dimensional through all of your communications.
Now that you know who you are, who your buyer is, and can express that in a message, you know how to target that buyer with the proper story through your sales process. And you're able to customize that sales process and adapt it to make it more meaningful based on what the attraction is. It's a marriage we're talking about; it's no different than that.
You're dancing on a date here. You have to figure out how are you going to make yourself attractive, and what lines are you going to use to land this beautiful woman that you're mad about. So you're going to woo and romance that person, but if you're smart (which most guys aren't), you'll do it by focusing on your outstanding features, but also communicating those that we'll say you're falling short on, and being honest with them. It's the same way in franchising.
An example: The great thing about coffee is that people drink it all day long, seven days a week. That's also the bad thing about coffee, and the bad thing about this business: it's all day long, seven days a week. So I'm revealing what is good about the business: your cash register can ring all week, but your phone can ring at eleven o'clock Sunday night.
You have to expose and use your process so that you are featuring those attractions, but you're also revealing-so that their expectations are going to be met or exceeded, and people are not going to come in with false expectations.
Once you have the message down, and you have the fit, and you know how to promote it, then it's really about following a process of five basic steps. There also are in-between steps that sometimes can occur in different order (some can and some can't), depending on the franchisor, their program, and the current strengths of the franchisor.
II. The Five Stages
2) Program Review
3) UFOC Review
4) Franchisee Validation
5) Discovery Day
The first thing here is prequalification. You have to take your inquiries and determine whether they have the basic criteria you're looking for. Are they ready to get in the business within the next 90 days? Do they have the money? Is there a special skill set they require?
In your prequalification stage, have a brief conversation-just enough to determine you have a qualified inquiry and you're going to move ahead. The purpose of this step is to sell the interested person in returning your application.
2) Program Review
The application comes in and Step 2 occurs, which is the Program Review, as I call it. This stage is finding out about the individual, asking key questions, a lot of probing questions. You determine more than the surface stuff-the money is easy to determine, the backgrounds are easy to determine, the length of time to get in the business, etc. Those are the simple things.
(During the Program Review, you also set the close. See sidebar, "Setting the Close.")
It's probing with open-ended questions, because you want to find out who these people are. I have a list of 40 or 50 probing questions that I've used through the years. What are they looking for in a business? What are their goals? What does their family think about them getting into the business? Does the spouse even know about it? How do they envision themselves running the business? Why now? What are some of the big factors in their decision-making process?
The key here is that getting into the prospect's head will get you ahead with the prospect. You have to know what your prospect is thinking, and this leads into the psychology of buying. You need to know what that buying mentality is for the person that's on the other end of the line. What motivates them? What do they want the business to do for them? Lots of times sales people never ask that last question. You really have to take a consultative approach to this.
The buyer is buying your opportunity. They're not buying your product, they're not buying your business. It's what your opportunity will do for them. The opportunity usually is a combination of many things; the financial potential is only a part of the equation. For example:
"I want to be in a fun, enjoyable business. I want to enjoy the trip. I want flexible work hours. I want weekends free. I want the power to be my own boss, to be in control. I want to own a new, growing, hot concept in my community. I want something where I don't have to travel, where I can be an integral part of my community and get to know my neighbors. I want my family members involved in the business."
Those are some driving factors. There are many different factors that will influence somebody to purchase a business, and you must know what those motivators are. What are their buttons?? You're matching up what your business offers with their hot buttons. Now you're really able to qualify better, because you have your success profile, and if it's matching, that's great. So it's going through those series of questions.
I can't stress enough that many franchise sales people fall into the trap of only pushing product:
"Let me tell you about our franchise. We've been in business for 42 years. We've got a great process for cleaning rugs. In fact, we clean 1.5 million households every 3 months. You've got a beautiful truck, which we fully equip for you, and we have an automated POS system, which is really great; it gives you management reports, so you can really take a good look at your business, and you'll need about three operators, blah, blah, blah..."
I'm pushing information at them, which will disconnect you from your prospect. I'm explaining and describing the details of the business, rather than focusing on who I'm talking with:
"Tell me about yourself. I want to know about you," for example. "Let me share some insights with you about our business. You mentioned that you're looking for a business that eventually will provide you with a lot of free time. That's where this business could really be up your alley, because after the first three years or so, many of our owners can bring in a full-time manager that basically runs the business."
I'm talking about a company like cleaning service franchises. That's one of the attractions of their business: You build up your client base, it's very predictable, and it's manageable enough so you can become semi-absentee and take vacations now and then.
The Program Review serves a dual purpose: to find out about the buyer; then on the other end, to provide some basic information the buyer deserves to know. And describe the business in persuasive terms they can relate to.
3) UFOC Review
You must set up the UFOC Review so the buyer knows what they're going to be looking at. Because if they don't, you could lose them very quickly. It's hundreds of pages of legalese that somebody in their right mind wouldn't sign unless they had an understanding up front of what it represents, and why it's a great document . It's the value of having all that information tucked into one document, which they can't get in any type of business they're looking at unless it's a franchise.
Explain the document and set it up as a very valuable guideline (which it is) for an individual to understand the franchise; and the fact that it is written to protect the integrity, consistency, and quality of the products and services of that brand. And that it's safeguarding those 95 percent of franchisees in every system from the 5 percent that decide they want to rebuild the wheel. You present it in that fashion: that it's full disclosure and there are no big surprises.
Earnings claims? They're wonderful. If any franchisor doesn't have earnings claims in their UFOC, I definitely urge they put them in. There are only 20 to 25 percent, at most, doing that now, and it provides those franchisors with a definite selling advantage over those that don't. Buyers want earnings claims information. The FTC did a study approximately 15 years ago, and found out that for buyers of franchises, that was their number one complaint. They really couldn't get any numbers. How much money can they make in the business? Or at least some data they can use. Buyers want that information.
You use the UFOC Review to ask questions up front so you have an idea of how they respond to the document. "So what did you think of the document?" instead of "Okay, what are your questions?" Again, it's probing, probing, finding out about the buyer, what's going on in their head. "What are some of the major, general questions that you have?" When a prospect claims, "I don't have any questions," make sure you review the critical parts of the information in the documents. Otherwise, you may be sorry later on when you realize your candidate didn't understand the material and was too afraid to admit it, or was trying to shortcut the process, which may create problems.
4) Franchisee Validation
This is where, as a requirement, you want your prospective franchisee to talk with those in the business, and in their own mind determine who they feel most comfortable with. Is it the stars at the top? Is it that middle tier, your good, solid franchise owners? Or do they identify with the few struggling franchisees that are in every system?
"You'll know by the time you're talking with different owners who would be in that upper strata and who's at the bottom. And it's good to find out: why are they struggling? Ask them questions. How do you market the business? Do you have employee issues? Is it easy to hire good employees? What's your turnover like? How many hours a week do you put in the business? What do you enjoy about the business? What do you dislike about the business? What's the number-one challenge you have? Are you meeting your financial expectations? And by the responses you'll be able to tell those that are successful and those that aren't."
And then you ask them, "Can you see yourself in our family of franchisees? Which owners do you identify with and why?
5) Discovery Day
After the UFOC review, Step 5 is Discovery Day. It's "show time," and "closing time." For candidates coming for Discovery Day, it's really a reinforcement of what they've already learned, and they're now ready to buy-but it does require a mutual decision to ensure that this franchise is the right opportunity for them-and for the franchisor as well.
Preparing the individual for Discovery Day is really important. When you complete your UFOC Review, that's when you talk Discovery Day. Actually, you're talking about it all along in the process, because you're building up to it. It's all in preparing them for the close.
When they come, it's really a matter of they see and feel and touch and taste the concept. And at the end of the day, if they're ready to go and want to be considered by the Review Committee (the executives who have had an opportunity to meet them during the day), they will be considered and granted the franchise if they are the right fit.
Once notified of the thumbs-up from the executives, it's a matter of signing documents within a specific time frame. I'm saying seven days. You extend your offer for a limited time period. Most franchisors don't do that. You can have people for two, three or four months afterward that franchise companies are chasing. So you extend your offer from the review committee, and then it's a matter of signing documents and you're in business.
If the candidate decides to pass on Discovery Day, or the Review Committee does, that's okay. You set the expectation where it's going to be a comfortable event, a mutual approval. It's not about the quantity of franchises you close, it's all about the quality of franchises you successfully close!
Setting the Close
One of the things that many companies have problems with is closing the deal. And there's a process for doing that, which you're going to lay out during the Program Review.
Establish your role as the development executive: "In the process, my role is to facilitate and educate you as best as possible-and myself-about the prospects of getting together on this franchise. I'm not here to sell you anything, it's really to explore and investigate this opportunity."
Also you establish ground rules: "Along the way, if there are any red flags that come up, please let me know. Because we have to be totally honest and open. Communication is very important. And the same thing for me: I'm going to raise my hand if something comes up that we can't provide which you're seeking in a business."
What you're doing is gaining agreement on the rules on setting the close. And you have the right to confront a prospect who doesn't do what they said they would do. ne You're avoiding those problems because you can always call the person on the red carpet. "Wait a minute, hold on a second Joe. Didn't we talk about this? Being totally open? It's okay that you can't pull the trigger, or that you got another job. Just let me know what the straight scoop is. Remember, I'm not looking to sell you into the program. We're seeing together if this is the right fit."
It will save that time and aggravation, because chasing is wasting, as they say. There's nothing worse. It gives the sales person the authority to call somebody out when they're not doing as they said they were going to do; or they're covering up the real reason they're hesitating to follow your process. Disqualify them when this happens.
Work by appointment only
Once you've made initial contact in the Program Review, from then on there's an appointment set in the process. "I respect and value your time, and vice versa I'm sure. Let's set this up so that from this point on we'll work on an appointment basis for future calls. So for the next call, the UFOC Review, we know that we're going to be talking next Tuesday at 3 p.m. on a conference call."
A lot of young franchises don't do that. They say, "Well, why don't you get back to me when you've read the UFOC and we'll review the information?" Or, "Why don't I call you next Tuesday or so? Do you think that would give you enough time?" Because the problem is you make a connection 29 to 32 percent of the time where an individual has time to speak with you. (Years ago we studied that.) Or it's back and forth phone calls.
And it's a qualifier. What I'm talking about is setting the close as you're qualifying that commitment that somebody is going to follow your decision-making process.
Establish the timeline
As we move forward, most of our owners that have come aboard have made a decision on our franchise within three to four weeks. That's typically what happens. "We'll explore the information during the interim, and any time along the way if this doesn't appear to a match for either of us, that's perfectly okay. Does this work for you?"
If you, as the buyer, say, "Y'know, I've really been thinking and it's going to be too soon. I've got some things going on and my daughter's graduating from college, so it will probably be another eight to nine months."
"Well, that's great. Why don't we do this? We'll put this on hold for now, because things change-your area may not be available any longer-and we can take it up again. Why don't you call me about 60 days prior to being ready?"
You have to put a timeline on it, so the individual is saying "Yes, within three to four weeks I can make a decision on your business." Then, I'm going to review the five steps in our exploratory process, so the candidate knows what to expect and where we are going with this.
From this point forward, scheduled appointments are set recognizing the agreed upon commitment to complete the franchise investigation, and either join or pass on the opportunity.
Discovery Day checklist
Make sure your candidate gets preliminary pre-approval of financing prior to attending Discovery Day. If you don't, you may have somebody that comes in and they want to sign on, and you say, great! But afterwards you find out the guy was bankrupt, or he can't get funding because he's got problems. Or he lied on his application. Determine the prospect's fundability first. Otherwise Discovery Day will be an expensive waste of time and resources for both you and candidate.
Closing Deals Faster
1) Provide a time frame to respond for your initial prospect conversation, as well as in your packet cover letter, i.e., "return the application within five days or we will assume there is no longer any interest."
2) Break your full application into two forms, which can prompt faster/additional responses from qualified candidates.
3) Establish a Decision Day of three to four weeks when you receive and review the application with your prospect.
4) Provide the steps of your franchise approval process to coordinate with the agreed upon Decision Day. Set up all future conversations by telephone appointment.
5) Get tentative financing pre-approval by a third-party lender by setting up a 15-minute phone call between the lender and prospect.
6) Review disclosure documents prior to the Discovery Day visit. Let your prospect know that the franchise agreement is not negotiable, and that it is written to protect the good franchisees and the quality standards of your system. If they are using an attorney, emphasize the need to hire a franchise attorney with suggestions on how to speed up their review, i.e., book a two-hour appointment to review the documents with them at their office.
7) During scheduled calls, review your program using focused conversations, e.g., about your core areas of training, marketing, field support, products and services, and territory/site selection assistance. This may be more expedient and productive than having general discussions on various topics.
8) Date your franchise agreement with a deadline for returning the documents with an accompanying check for the total franchise fee.
9) If you aren't closing a franchise in person, schedule a telephone closing to guide the candidate through the document signing and overnight delivery of the papers and money. It often speeds up the transaction.
10) Develop your website as your prospect brochure and deliver your disclosure documents electronically, which can further streamline your sales process by several days.
Using Profiling Tools
A personality survey, or profiling tool, is becoming more and more popular to assist in qualifying potential franchisees. These aids can provide a better understanding of the personality traits and characteristics inherent in individuals. Importantly, do they reflect attributes that match up with your franchisee success profile? For those companies that do use them, you want prospects to complete their surveys prior to Discovery Day.
They're a good indicator. But you don't use it as a yes/no tool, you use it to help reinforce your decision about whether or not to award the franchise. It's really helpful, especially in cases where it can be a tiebreaker, if you just don't know.
The candidate's behavior may or may not mirror "who this person really is" during these group and individual meetings at Discovery Day. Better or lesser performances may be given depending on the adeptness of the franchise candidate to sell himself or herself to the home office staff. How many times have we seen a borderline candidate who barely squeaks through your approval process and later turns out to be one of your best franchisees?
It's tricky, because what happens at Discovery Day is that it's like a massive job interview for some people. They come in, or they're in a group, or they turn into a church mouse because they don't interview well. Also, if your system has a lot of diversity and you're dealing with various ethnic groups, a family member by their upbringing may assume a different persona at Discovery Day that doesn't reflect the true personality of that individual. How many times have we seen a woman with family members in attendance change her personality from what it was on the phone or in prior individual meetings? In short, these tools are very helpful.
Get Them Involved!
Throughout the entire franchise sales process, provide interactive assignments. One of them is through franchisee validation calls. You want to require your prospect to participate in the investigation. If they're not active, you're going to lose deals. So you want them busy; you want to see them engaging themselves in the business. An example:
"Is there a Starbucks around you?" There almost always is! Even if it's no, you always ask questions and give assignments where it doesn't matter what the results are; you put a positive spin on it. If they say no, you say, "Well great! Have you been into a Starbucks?"
"Yeah, they're all over the place."
You say, "I want you to visit one of their stores and observe what's going on. Go at 7:30 in the morning, and over a half-hour time frame, count the number of customers that come through the door."
We know what the results are going to be, the prospect thrilled by the lines of buying customers. But if that Starbucks happens to be in a lousy location, we prep the candidate accordingly:
"Most Starbucks are very successful. There are a few they put in, because they're corporate-owned, that they know are not going to make money. They do it for branding." So if your prospect happens upon one of these branding stores, they might say "Wow, there wasn't much traffic there at all."
You say, "Well, yeah. Did you notice the location?"
"Yeah, it looked pretty lousy."
"Well, because our franchise stores have to be profitable, that's why we only go with prime sites."
Now you have them involved. If they went to Starbucks at 7:30 in the morning, this person is highly interested and a franchisee contender. If they didn't do it, if they didn't have time, maybe you don't have a very good candidate, or you're losing them.
What happens is they really become engaged. You have to activate their mind and understand that these people are unhappy with their life situation and want to make a change. Otherwise they wouldn't be talking with you. Involving them 1) gives you an idea of how interested they are in owning your business; and 2) it's a self-elimination process, because they might go into a Starbucks and say "Wow! It was loaded with people. There were five employees behind the counter racing all over the place. It was bedlam. And you know, I'm 58 years old, it's too much for me."
And my response would be, "I'm glad you went. That's one of the things we talked about on the phone. This is a very high-energy business, and you've got three hours in the morning that if you can't keep up, it's not the business for you. Not unless you get an operating partner."
That's going back to giving them the Wow factors, but also giving them the realities. What are the realities of your business? Because there's no perfect business. Buyers want to hear what the drawbacks in your business are, contrary to what you might think. They'll also gain more confidence and trust in you and your franchise.
We've gone paperless, so on the plus side technology continues to help showcase our franchise opportunity, because of what we can do. We use electronic document delivery. I dumped my brochures three and a half years ago. We have no paper because our website is our brochure. We have a live in-store cam with streaming video. That technology is great.
The increasing use of technology really speeds up the process-depending on your buyer. What does the buyer want? If you have an educated buyer that's middle management up, they're all using the Internet. Why would they want to sit there and wait for you to send print materials, which is going to take you two to three days longer? And you're going to run out of brochures, have to reprint them, and update the materials, which is very expensive. Why wouldn't you immediately put it in their hands? It's amazing. I'm sure there are other companies doing it, but we're apparently still, if not unique, one of only a few that do this.
Again, it depends on the audience. Because this would bomb with some businesses. Somebody jumped up in the audience once when I made that statement about electronic documents. He said, "You're crazy. We tried them and it didn't work."
I said, "What's your business?"
It was janitorial. And I said, "You know, you're absolutely right." You've got to match up with your audience. What does your buyer want? Certainly not electronic UFOCs. And if they are on the Internet, they're probably still on 56k. It doesn't make sense for them because that's not how they research business. That's not what they use on a daily basis.
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Franchise Update Magazine: Issue 4, 2005