Paying Attention to Compensation?: Your Sales People Are--And So Are Your Competitors!

Are you paying your sales team too little? Too much? And how do you know? Call the competition and ask what they're paying their sales execs, managers, and staff? Right.

There is a better way--and it's legal, too: Franchise Update's Annual Franchise Development Report (AFDR). The AFDR, which began in 1998, collects information from franchisors each year with the goal of providing franchisors with accurate and actionable intelligence that can help them improve system performance and growth. Nearly 125 respondents participated in this year's AFDR. In sum, they represented more than 38,800 units--and they plan to add 5,360 more franchised units this year through 3,400 franchisees.

With new unit sales the foundation of franchising growth, it's more important than ever for executives and managers to have quality data they can use to benchmark and compare their numbers with those of other franchisors--along with those all-important intangibles that contribute to development success (see "Building a Winning Sales Team," ).

Yet as the economy churns, many franchisors feel they're operating without a map--and for some, without a net. Yet they all must cross the turbulent waters from the "good old days" of just a couple of years ago through today's constricted economy into a future that seems more uncertain than ever. How do you plan for that? Yet plan we must. And that's where access to quality data comes in--to help franchisors answer such questions as:

• Is our compensation policy in line with our competitors and industry?
• How many sales people are optimal in relation to our size and growth goals?
• Should we "upgrade" our sales talent? Will it pay off, and how soon?
• And are we in danger of having our best sales talent recruited away?
• Should we expand our sales team? Sign with a broker or third party until the market improves?
• Should we revamp our sales process, hire a new sales VP, replace the team, or simply readjust expectations, lower sales goals, and try to ride out the economic storm?
• We've managed to continue growing, but what should we pay our new sales execs, managers, and staff--or upgrade our sales team?
• And if credit remains tight, even if we do hit our sales goals, how will new franchisees find the financing they need to open? Or current franchisees the funding they need for expansion?

While none of these questions is new, the economic meltdown has added a new twist--and urgency--to finding the answers that work for your organization, along with the best people and practices to manage your way through the current economic slowdown.

To help answer these key questions, we drill down into the AFDR data on sales compensation, highlighting salaries, commissions, bonuses, and perks. (Note: all results are presented either in dollar amounts or percentages.)

BASE SALARY

Average base salary, sales people

Average base salary of most-senior franchise sales executive(s), by industry sector

Average base salary of sales people, by industry sector

Average base salary of most-senior franchise sales executive(s), by unit investment

Average base salary of sales people, by unit investment

One in five respondents increased their sales staff last year, with the largest increases in the retail food and service sectors. While 36 percent decreased sales staff overall, the retail non-food sector took the hardest hit, with 71 percent reducing sales staff in 2009.

Have you increased or decreased your sales staff in the last 12 months?

Have you increased or decreased your sales staff in the last 12 months (by sector)?

Commissions & Perks

Among all respondents, 83.5 percent provided commissions to their sales people. The average range of those commission per sale is as follows: