Prospecting for Franchisees: Align your Sales Process with 3 Current Trends

Absent an economic shock, we should have continued expansion this year and into next.

Fueled by the tax bill’s expected near-term impact, the economy is gaining strength. February’s NFIB business optimism index reached a record high dating back to 1996. Also in February, The Conference Board’s Consumer Confidence Index hit its highest level since 2000. If the economy continues to cooperate, what are some underlying trends you should be aware of as you execute your franchise development plans?

I think the answer to that question lies in understanding the changes that have shaped the prospective franchisee of today: greater understanding of the information available about a brand (let’s call that the fake news backlash); improved ability for you to find prospective franchisees (let’s call that the big data era); and the likelihood your next franchisee may be an experienced franchisee from another system (let’s call that the multi-unit trend).

• Fake news backlash. I am hopeful that the fake news backlash surrounding politics helps franchise development. We have suffered through an extended period of distrusting news on most levels. This is teaching us to go beyond claims and headlines to verify what is being said, especially when it comes to investing our own money. Over the past 10 years it’s become increasingly easy to start a franchise brand. In fact, it can cost less to become a franchisor than to become a franchisee. A slick marketing effort with a weak business undercarriage is doable because of this low-cost barrier to entry. The result is the franchise business model became susceptible to franchisors that were not likely to be successful, hurting all of us who try hard to execute the business model well. The fake news backlash is creating a more discriminating prospective franchisee, and that is a positive for the business model. It also should help inform your messaging around statements that can be validated and verified.
  
  Generally, a recession is good for franchise development as it creates a pool of prospects from displaced mid- to upper-level managers. An extended period of continued economic expansion generated record low unemployment and a hot market for companies seeking experienced workers. Further, we have a record number of franchisors seeking prospects. That’s a tougher market for franchise development. Forced to look at alternative ways of attracting franchise prospects, we are beginning to see a change in the time-honored way of marketing to prospects.
• Big data era. We are finding that the tools developed during the big data era can help franchisors identify prospects before the prospects know they are prospects. Starting with the 2008 election and maturing over the next two election cycles, detailed household on more than 150 million households was harnessed to determine political leanings. Combining an understanding of a household’s neighborhood with family details, mortgage and expenditure patterns—even such things as the magazines a household subscribes to—led researchers to a good indication of that household’s political leanings, allowing targeted messages to be directed appropriately (or inappropriately if you don’t like the privacy implications).
  
  Now pivot this capability to franchise development. If you know the household profiles of your better franchisees (and if you don’t, they can help you with that), then you can target specific households in new markets with, at least in theory, a predisposition to your offering. I know it can work because we have done some of this research for brands.
• Multi-unit trend. We now have a greater than 55 percent chance that the next franchise unit will be developed by an experienced operator because that’s the percentage of units multi-unit operators control. This multi-unit trend raises the bar on the information you provide and the information that is out there about you. Think of this trend as the fake news backlash on steroids. Experienced operators don’t need hype and promotional material. They need facts, key information, and methods of validation within your system and through objective third parties.

Taking advantage

How do you turn the fake news, big data, and multi-unit trends to your advantage in this stage of the economic cycle? Good information is the key on all three levels. First, use fake news skepticism to your advantage. Think beyond the FTC Rule. For instance, if you have the lowest unit turnover rates in your sector, fold that performance information into your website and marketing program. Are your marketing support and pre-opening programs more comprehensive and better than your competition’s? Focus on your good outcomes that show distinctions across all of the 11 functional areas you control. Second, test ways of finding prospects before they know they should consider your brand. Embrace the big data era. Third, learn what information experienced operators need to make an investment decision on your brand. Then find ways to put that information together and reach out to them with it. They have more choices than ever, so stand out with the quality of your content. A generally positive and extended economic expansion has made your development effort harder, so step up your game.

 Darrell Johnson is CEO of FRANdata, an independent research company supplying information and analysis for the franchising sector since 1989. He can be reached at 703-740-4700 or djohnson@frandata.com.