Wayback Burgers Closes More Deals Faster with Financial Prequalification
Franchise development executives know that a high percentage of their future franchisees will require debt to purchase a franchise unit. Even the multi-unit franchisees that so many brands tirelessly chase will leverage their equity capital with debt. Franchisors need to 1) understand how and when the franchisee debt requirement affects the franchise development process, and 2) what actions they can take to achieve their desired outcomes: sell more units, achieve faster openings, and stop investing time into subpar prospects.
The role of financing in the development process
The franchise development process is often described as a funnel. Franchise leads enter into the wide mouth at the top of the funnel, and as the funnel narrows fewer and fewer leads remain until a limited number of franchisees emerge from the its narrow end.
The role of financing traditionally begins at the lower end of the development funnel for both the candidate and the brand. Unfortunately, this can result in missed opportunities, inefficient use of resources and time, and frustration and disappointment for both. Regarding financing, the candidate most likely has one pressing question: “Can I get the financing I need to purchase this franchise?”
This question is an impediment or hurdle that can slow, or even halt, a candidate’s progress down the development funnel. Successful development executives structure their processes and organizations to avoid roadblocks. Take the most common hurdle for instance: “Will I make money with this brand?” Brands have constructed thoughtful and rigorous validation programs such as lengthy Item 19’s, well-designed discovery days, and franchisee reference programs to educate candidates, thereby eliminating those hurdles. To bypass the financing hurdle, “educating the candidate” is the path to follow.
Only a fraction of brands take action to solve the “Can I get financing?” question. Some took the extreme measure of offering direct lending programs. Take Matco Tools, for instance. The brand has extended more than $100 million in credit to its franchisees, in large part to eliminate their candidates’ financing anxiety while in the development funnel. Matco’s growth could not have occurred without such a bold program. Few brands, however, have the capital or desire to follow Matco’s lead. A better solution exists.
Case study: Wayback Burgers
The critical task is to directly answer the candidate’s question, “Can I get the financing I need to purchase your franchise?” Home sellers are similar to franchise development executives, in that neither wants to waste time on unqualified buyers. Home sellers have long cracked this problem by requiring that offers to purchase include a mortgage prequalification, made possible from a credit score. Leading franchise brands are following a similar path, and the results, although early, are making the franchising community take note. To understand how this concept works in the franchise market, we look at a specific case study: Wayback Burgers.
Started franchising: 2009
The executives at Wayback instituted a new policy to offer all leads a complimentary financing education report that includes a personal credit score (FICO), a business credit score (FICO SBSS, used by lenders nationwide), and an instant financing assessment that may include prequalification offers from lenders. The solution, bQual, was developed by BoeFly in conjunction with FICO and Equifax. Beyond offering the financing education report to all leads high in the funnel, Wayback requires the report once the candidate formally applies.
Early data shows that a candidate who has received a bQual financing education report progresses down the funnel at a higher rate and in a shorter time than leads who are not given the financing education report.
Initial data analysis of the impact of bQual
on Wayback’s development process
% of candidates from introductory call who schedule a discovery day in the period analyzed
Average time from screening call to when discovery day is scheduled
John Eucalitto, president of Wayback, has been vocal on the importance of addressing all candidate concerns. “When a lead has a question that we can’t or don’t answer we are putting that lead at great risk of getting stalled out, or worse, falling out of our development funnel altogether,” he said.
“By giving them their bQual,” he added, “a few important things are happening:
- Our brand is giving the candidate something of monetary value. We let them know that they’d have to pay to get this information elsewhere, and the lead appreciates it. It’s a powerful engagement tool.
- The candidate gets objective information on how banks will judge them, so it instills confidence that they are fundable, which gets them through the process quicker.
- By getting the candidate started on the financing process earlier, particularly with the help of consultation by a BoeFly financing expert, it leads to quicker funding that helps speed up the opening date.”
Benefits of prequalification
Small business lenders have long been stymied in their efforts to offer prequalifications because prospective borrowers had no way to secure their small-business credit score. This solution has the power to transform the process because the franchisees access the same data the lenders will ultimately use to judge them. Since the data is independently secured, rather than borrower-self-reported, banks can use the information to issue meaningful prequalifications.
As the Wayback Burgers case shows, brands have much to gain by investing resources to provide leads with independently secured data and corresponding lender-issued prequalifications.
Specific uses and applications
I conclude by presenting four specific use cases deployed by franchisors, not as an exhaustive list, but rather to inspire future unidentified uses.
- As an offer to generate inbound leads (Stage: feed the funnel). Brands that engage in strategies to generate inbound leads understand the importance of offering something of value. Brands offering complimentary bQuals as an inducement offer deliver value to the lead (both monetary and educational). More important, the brand may be eliminating a future hurdle and reduce the franchise development timeline.
- As an engagement tool at a franchise expo (Stage: high funnel). Brands that participate in franchise expos are investing heavily in the hope of securing one or two new franchisees. It follows then that brands are now investing resources to provide their booth visitors with a real-time financing assessment report. The International Franchise Expo at the Javits Center in New York this week (June 19–21) will feature a central booth, “The Know the Score Pavilion,” where all brands can send leads to provide a report.
- Included on outbound emails (Stage: high funnel). Brands are now including on all auto-generated outbound emails a simple message that invites the lead to receive a valuable report at no cost to become financially prequalified. Common copy is, “We know that many new franchisees are thinking about whether they can get the loan they need to purchase a franchise, and as a great brand we invest to help you answer this question. If financing is on your mind, please click here to get your free financial assessment report, which includes your personal credit score, business credit score, and prequalification offers. It’s a $79 value, on us!.”
- Required at the formal application (Stage: high funnel). Brands are primarily adopting this tactic to help achieve faster funding, which drives faster openings. There is an additional benefit: if the lead learns that debt financing will be a challenge, they are better positioned to seek an alternative early in the process.
Franchise experts have applauded the innovation of brands delivering candidates their consumer and business credit scores and lender-issued prequalifications. The real question is not whether the solution is valuable, but rather which creative strategies will top brands deploy to beat their competitors in the market.
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