When is Cost an Investment?

As we come to the end of the current cycle of franchise exhibitions (is it just me or is it crazy to have two shows on at the same time and then another one a few weeks later) what are franchisors going to do differently to achieve their franchise sales targets? As I wandered around the recent franchise exhibitions in February and March it was interesting to meet so many franchisors that are committed to the cycle of shows yet rarely consider doing anything else?

Sure, the odd mailshot here and there will create some lead flow but most seen resigned to the fact that the lead flow dries up for a while.

It needn’t be, but so few franchisors are aware of options available to them and they have delegated responsibility to their management team rather than take the important decisions at board level.

What do I mean by this?

Franchisors (inc Master Franchisees) are focused on building and developing their network. To do that they need to invest – in all areas. As I have seen, often they delegate franchise recruitment to a Franchise Manager and whilst that seems logical a Franchise Manager doesn’t have the same priorities as the Franchisor. They have to achieve their targets but all too often they are managing a budget and that means they are managing costs not investment.

When looking at alternative strategies they tend to stick to what they usually do – and accept that they will reach the same results – unless they are lucky and just happen to reach their target (the old adage about not getting fired for doing the same thing comes to mind here – where’s the bravery!).

We’re working with two franchisors internationally and have demonstrated unequivocally how we complement their existing franchise recruitment strategy (nobody is saying throw the baby out with the bathwater) by running alternate campaigns that generate UNIQUE leads that they are unable to reach through their current strategy.

With each of these systems we have added on 10 new franchisees in 2015 so it makes sense to offer the service to their UK counterpart – obvious right? Well when a franchisor delegates the cost budget to a franchise manager who is ‘afraid’ to break from the norm they cite that the costs of acquisition are too high. That defies logic!

The reason is they are not investing in the business, they are managing costs and don’t want to be seen to be rocking the boat with new ideas - that's not their job.

Is your franchise recruitment strategy broadly the same today as it was five years ago? If the answer is yes it is time to open your eyes and not get left behind.

A system with high growth plans achieving, let’s say, 15 new franchisees per year has the option to reach 25 per year. At £30k per franchise that yields an extra £300k of fee income per year less acquisition costs – let’s assume £75k (25%). However, if the acquisition costs seem high bear in mind this is over and above the income received from the first 15 sales (£450k less costs).

Getting next year’s sales this year builds your network faster and in addition to the franchise fees the network also receives management fees sooner – see my blog on lifetime values here. If you want to know how we help franchisors grow faster by investing in their marketing rather than the cost of marketing get in touch.

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