Research report provides benchmarks and insights into franchise sales trends
Only 7 percent of respondents to Franchise Update's Annual Franchise Development Report said they are exceeding their 2008 goals. Another twenty-one percent said they were meeting their goals. 72 percent of those responding said they were falling below their sales goals for the year.
Of those meeting or exceeding their sales goals, 39 percent were in the food category and 35 percent were in the service category.
These successful recruiters are mixing it up when it comes to their budgets. The franchisors hitting their sales numbers are using all kinds of media (the Internet, print, trade shows and PR channels to generate qualified prospects. Nine out of 10 in this group are planning to spend the same or more in 2009. And they're not afraid to pay higher salaries to senior sales executives and managers, and even pay higher broker commissions, to get the results they want.
The Annual Franchise Development Report produced by Franchise Update Media Group, is the only franchise sales and lead generation benchmark report in the franchise industry.The report is drawn from the responses of participating attendees. This year, data was gathered from 148 franchise companies with 57,000 units and more than 39,000 franchisees.
Based on those numbers, the study identifies sales benchmarks and marketing intelligence to provide insights franchisors can use to accelerate their expansion and improve recruitment practices. A myriad of franchise concepts, investments, and budgeting numbers are collected through extensive industry surveys, executive interviews, polling information, and online and mystery shopping research.
Details from the report show how franchise recruiting budgets have continued to increase since 2006. The average franchise recruitment budget for 2008 was $175,000, up $10,000 from 2007. That figure is projected to rise to $198,000 in 2009.
The Internet continues to be the dominant area of franchise recruitment spending: nearly half (48 percent) is funneled to Internet resources, up from 45 percent in 2007, but down from its peak of 51 percent in 2006.
With so many dollars being spent online, it was no surprise to learn that the Internet was the number-one sales producer, accounting for 35 percent of all franchise sales among participants. The Internet was followed closely by referrals at 28 percent of all sales in 2008. More money was also being spent on print publications, PR, and trade shows, which claimed a higher percentage of sales than the year before.
The surprising finding this year was the growth of the 'Other' category, which includes sources like craigslist, blogs, and social networks. This category rose to 15 percent from 4 percent the previous year. Consider that 58 of the 148 franchisors surveyed (4 in 10) placed online ads, videos, and press releases on social or business networks, blogs, YouTube, and sites like craigslist. Seven reported sales from this category, a number sure to rise in next year's report.
Of the franchisors surveyed, 34 percent reported leads are up, 18 percent said they're the same, and 48 percent reported leads are down. In the area of lead quality, 26 percent reported that the quality of their leads quality was better right now, 34 percent said it was about the same, and 40 percent said it was down.
Brokers continue to play a pivotal role in franchise recruiting. Half of those surveyed said they use broker networks to some degree; and 85 percent said they had closed deals from brokers. The median broker commission was $13,000.
Measuring costs is an important part of any franchise sales process. Yet, surprisingly, almost one third (30 percent) of respondents do not track their cost per lead. Surprisingly, 43 percent do not track their cost per sale. Franchisors must track this stat in order to be effective and grow.
In the online world, the study found only one in three (32 percent) track unique visitors to their websites that convert to leads. And only half (53 percent) track unique visitors that go to their franchise request form and convert to leads.
"The franchise landscape has become increasingly complex, driven by an ever-expanding array of options, including Internet marketing, broker sales, outsourcing alternatives and a record number of competing concepts," said Steve Olson, publisher of Franchise Update Media Group. "The information contained in the Annual Franchise Development Report is designed to assist franchisors in accelerating their system growth, increase selling performance, and making smarter, more cost-effective advertising decisions."
For more information on the Annual Franchise Development Report and for ordering information, go to www.franchise-update.com/magazine/franchisedevelopmentreport/