Today, savvy franchisors with good validation are jumping their referral sales 25 percent and more by developing aggressive, well-planned referral programs. Yet many franchise systems don't capitalize on the full recruitment potential within their networks. They appreciate the leads they receive, but don't actively promote what is the most valuable lead source in franchising. Referred prospects are as precious as gold, just waiting to be discovered in your own backyard!
Money Mailer's system-wide enlistment of franchisees to help recruit new franchise owners was critical to re-energizing the company's development throughout the United States. Buy-in from their advisory council, combined with a multi-channel referral campaign to franchisees contributed to a 600 percent increase in new franchisee sales over the previous 18 months.
Studies validate the power of referral sales. Close rates for direct referrals are typically three times higher than for other leads. According to Franchise Update Media Group's Annual Franchise Development Report, referrals continue to be a top franchise sales producer every year. Quick analysis of lead costs and sales ratios provides a compelling message to all: maximize your referral sales potential!
Franchisees are logically your prime resource, but don't overlook your employees, suppliers, and business associates. Tapping these secondary referral sources can also produce qualified prospects. One East Coast sales executive launched an upscale quick-service café by extensively prospecting his industry network. He sold his first 8 new franchisees for the new concept by aggressively soliciting the food operators he had built relationships with over the previous 15 years. Ask all your vendors for franchisee referrals. As your "partners," suppliers should be expected to refer your opportunity to individuals they know are looking for a business.
Include a budget for referral marketing in your media plan. Producing special promotional materials and incentives will spur referral activity, at a selling cost often substantially lower than for other lead generation activities.
High-growth companies with referral campaigns stress that recognition, reward, and repetition are keys to a successful campaign. Sending a once-a-year memo announcing referral fees for new franchisees is only the start of what should be a year-round effort. (If you don't have a referral compensation program, run it by your attorney first.) Every two weeks, put your recruitment effort in front of your franchise network with scheduled mailings, website postings, meeting announcements, group emails, newsletter updates, and other communications.
Create an 8½- x 11-inch, tri-fold recruitment brochure with a referral space on the back panel to identify franchisees, employees, or business associates. This handout piece makes it efficient and easy for the referring individual and informative for the inquiring prospect. The same brochure also can be used as an inexpensive mailer to "borderline" franchise inquiries and as a handout at seminars and trade shows.
How many of your franchisees' customers and acquaintances realize that you offer franchise opportunities? I guarantee most will be unaware... unless you tell them! In one instance, a friend of the founder of a $1 billion temporary employment agency was looking at a competitor's franchise. To his surprise, he happened to read an article about his friend's company. This prompted him to buy into his friend's system. How fortunate that the founder's friend saw the article. Never assume everybody knows about your opportunity!
Consider providing franchisees with retail posters, ads, stationery, invoices, and other tools that let potential prospects know you are a franchise. Window signage saying "Franchises Available" should be in any retail, office-based, or mobile franchise. Some franchisors tag their retail TV and radio spots with "Franchise Opportunities Available" where appropriate. Simply put, broadcast to your customers that you have franchises and you will sell more franchises!
When I sold for a three-year-old franchise system, customer referrals were the top recruiting source, producing 46 percent of our sales. The national average was 24 percent that year, according to Franchise Update's annual report. When a customer is already a fan of your concept, half the battle is won. They see themselves owning your business, a positive experience they know firsthand as a patron, and now are interested in pursuing as a proprietor. Closing ratios should be three to five times higher for qualified customer applications than for non-customer applications.
Your operations staff is a key contributor to referral sales. The quality of their training and coaching abilities is a testament to the number of enthusiastic brand customers who not only want to purchase your product but believe in it so much that they want to own and market it as well. Recognize your operations team for the role they play in building the franchise system. An excellent support system builds happy franchisees, employees, and customers... who will continue to fuel your franchise growth!
Next month: More tips on increasing referrals to increase franchise sales.
This is an excerpt from my book, "Grow to Greatness: How to build a world-class franchise system faster." Order copies at http://www.franchise-update.com/magazine/growtogreatness/
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