FPG’s Process for Analysis, Problem Identification, Strategy and Execution

After talking to many franchisor CEOs and tracking clients’ progress, FPG’s concern about market disruption leading to a correction appears to playing out as predicted. For those who haven’t read our previous articles, here is the basic case for disruption in a nutshell. (For a detailed analysis, see Is the Franchising Bubble Ready to Burst?.)

1. Oversaturation of franchisors relative to the number of franchise buyers. FranData 2017 estimates show almost 4,000 franchisors and approximately 15,000 buyers. Ed Teixeira of Franchise Grade reports that more than 30% of Early Stage franchisors have 1 or zero franchisees. Think about this. Over 1,000 companies either thought or were told by business consultants or franchise attorneys their business would be in high demand as a franchise opportunity, missing demand by a mile.
2. Decrease in new business starts. In 2015, the U.S. Census Bureau reported only 414,000 total small business starts (latest available data), representing a 40-year low, and 10% down from the 2014 total of 450,000. A normal year looks like 500,000-600,000 starts. For more information, read The New York Times article A Start-Up Slump is a Drag on the Economy.
3. Record low unemployment according to the Bureau of Labor Statistics.

Drilling into the numbers deeper, the unemployment rate for most adult men and women of any race are at or near historic lows. For instance, the unemployment rate for black workers fell more than 2 full points from 8.9% in January 2016 to 6.8% by December 2017. The unemployment rate for Hispanics also fell to near record lows from 5.9% in January 2016 to 4.9% by December 2017.

Keep in mind, the latest available data from the U.S. Census Bureau is from 2015. The unemployment rate has fallen nearly an additional 30% since then. We may be looking at new business starts falling another 10%-30% from already 40-year lows.

A well-publicized 2014 survey by Bentley University showed that 67% of Millennials intend on starting a business and only 13% desire a traditional corporate career path. But anyone who has ever recruited franchisees for a living knows there is only one true entrepreneur for every 50-100 people with intentions. For now, Millennials appear to be content with the benefits of a full-employment economy.

The New Normal: Do More With Less

The data supports the FPG assertion that into the foreseeable future, franchisors have to learn how to do more deals with fewer leads. This means upping their game in every area of their franchisee recruitment effort.

Franchising as a Two-Metric Business

FPG asserts the best predictor of a franchisor’s success can be distilled down to 2 leading indicators: franchise profitability (unit-level economics) and the workability of the franchisee-franchisor relationship (franchisee satisfaction).

If a franchisor’s model is highly profitable and they have trusting relationships with franchisees who support the leadership’s vision and mission, then the chain will grow. The market will always reward a stellar brand. As long as this stellar brand can cut through the noise and clutter and skillfully share its story to the candidates who want what they have.

Case Study: i9 Sports Franchise Sales Breakthrough

FPG accepted i9 Sports as a client in May 2017. Their franchise development program was at a standstill. They employed a franchise lead generation agency that brought in 300-400 leads per month. These leads were funneled to an outsourced franchise development firm which, after many months and thousands of leads, closed one deal.

FPG was brought in to conduct a thorough investigation of their failed program and make recommendations for improvement.

The chain exhibited strong franchisee validation and reasonable earnings potential consistent with startup costs and expectations of target franchise candidate groups.

Analysis and Findings

FPG strategists looked at every aspect of the franchise development program and identified the following problems.

Lead Generation

FPG determined the lead generation firm was aggressively doing what was asked of them, namely generate many leads. However, FPG long ago conclusively determined that leads and buyers are separate and distinct groups. Buyers are not a smaller subset of leads, as traditional sales funnel metrics would lead someone to believe. FPG saw opportunities for a more robust lead generation and lead-nurturing content strategy, which would reduce lead flow but increase buyer engagement, creating a “fewer leads but more buyers” scenario.

Additionally, the i9 Sports pipeline consisted of the type of candidates FPG defines as passion players. A passion player has a hobby (sports) and tries to shoehorn their hobby into a career, regardless of the fit.

FPG saw the opportunity to appeal to a wider audience including what FPG calls franchise buyer archetypes.

• Family business. Because of its low barrier to entry, low cost of scaling, and doing business over multiple venues, FPG thought it would appeal to families looking to start a community business.
• Young guns. These are young, entry-level to mid-level managers who gravitate towards simple, home-based businesses where they can make it on hustle, rather than skills or business acumen.
• First-timers. This is the mid-level manager who has hit their ceiling in the organization they are in. They may be lightly capitalized and are looking for the business to quickly replace their salary in order to meet household expenses.

The business offers a different value proposition to each buyer archetype, which needs to be captured in the content strategy. For instance, first-timers place a high value on speed to replacement income. Family businesses place a high value on safety and security of the venue. Young guns value simplicity, training, and operational support.

Franchisee Recruitment Talent

Second, FPG saw the outsourced franchise development firm was underperforming and ineffective. We didn’t believe the franchisee recruiter could be trained on a new process and quickly be effective.

Brand Story and Content Streams

Third, FPG found a disconnect in content streams leading to an inadequate and incomplete brand story. I9 Sports franchisees run private youth sports leagues, which checks many boxes for passion player investors, such as sports, community, and make a difference in the lives of children. I9 Sports’ website focused on the joy of sports rather than the business of sports, thereby capturing the dreamers and the passion players, but not enough serious business people or the archetypes mentioned earlier.

The Franchisee Recruitment Process

The outsourced franchisee recruitment firm instituted a franchisor-centric, heavy-handed process where the franchise candidate couldn’t earn a conversation with the recruiter unless they submitted to the franchisor’s qualification process. Because the sales process was inconsistent with the franchise candidate buying process, candidates resisted, killing the pipeline.

Departmental Leadership

The i9 Sports team did an excellent job capturing and analyzing data. They ran effective weekly meetings. They gathered and analyzed the right key performance indicators (KPIs) and meetings were short, sharp, and effective. The KPIs validated FPG observations and conclusions.

The Plan

1. FPG fully integrated lead generation, franchise opportunity website design, franchisee recruitment process, lead nurturing content, and meeting protocols under the FPG Full Stack franchisee recruitment system, unifying all aspects of the franchise development department and eliminating competing personal agendas.
2. FPG and i9 Sports replaced the ineffective outsourced recruiter with a highly effective FPG-trained franchisee recruiter who understood FPG recruitment tactics and strategies.
3. FPG redesigned the franchise opportunity website, changing the focus from the love of sports to the business of sports, making a strong business case about what makes the business unique, profitable, sustainable for the long haul, and necessary to the customer. See the site here.
4. FPG expanded its target franchise candidate from the passion player, to also include first-timers, young guns, and family business. FPG included content, videos, infographics, and franchisee testimonials to appeal to these different buyer archetypes.
5. Lead engagement and lead nurturing content. FPG designed a downloadable Franchise Opportunity eBook to entice visitors to leave contact information. The Franchise Opportunity eBook was designed to provide more in depth information about how the business works and what it takes to succeed, moving qualified and engaged candidates deeper into the sales funnel. Download eBook here.
6. FPG created talk-show style videos featuring an in-depth interview with the CEOs of FPG and i9 Sports discussing vision, mission, merits, tactics, and strategies of the brand. See example at the end of this article.
7. FPG worked with i9 Sports to create an internal financing vehicle. Being a 65K investment, candidates would not access SBA lending, as lenders prefer larger startup packages. I9 Sports reduced the entry costs by about 50%.

The Result

Within 12 months, FPG and i9 Sports generated 8 new sales and 5 resales for a total of 13 deals, resulting in over $400,000 in franchise fee revenue and transfer fees, not counting the increase in royalty streams and shareholder equity. The average advertising acquisition cost for a franchisee was under $9,000. All deals came from a combination of digital marketing, brand storytelling, and franchisee referrals.

From Brian Sanders, CEO i9 Sports

“Despite the success of our franchisees, we’ve struggled to get consistent results in franchisee recruitment department  We’ve tried in-house and outsourced franchise lead generation and franchise sales solutions. FPG gets our brand, and by combining a well-crafted content strategy to tell our business story with targeted lead generation, digital marketing, a franchise sales process designed to work for our type of buyer, and FPG-trained recruiters, we were able to achieve results we have not seen in a long time.”

10 Keys to Creating a Breakthrough

1. Strong unit-level economics and franchisee-franchisor relationships.
2. Unique, profitable, defensible, and valuable consumer offering.
3. Clear franchise buyer target demographic (franchise buyer archetypes).
4. Clear value proposition as a franchise opportunity that resonates with the franchise buyer archetypes.
5. Intelligent content strategy that meets or exceeds the qualified franchise buyers’ demand for information. (Website, eBook, brand videos, infographics, collateral content, PR)
6. Highly effective franchisee recruiters skilled in managing the new franchise buyer-centric, self-directed, content-rich recruitment process.
7. A content and franchisee recruitment process consistent with how franchise buyers make investment decisions.
8. Effective departmental leadership and strategy.
9. Ready-to-go financing sources who understand the brand.
10. A skilled digital agency that understands the difference between leads and buyers.

How to Make an Impact in 90 Days

1. Improve your lead generation content:
   • Know your target franchise buyer archetype and produce content specifically to meet their needs.
   • Redesign your website. Cost: $25K-$30K.
2. Create lead-nurturing content.
   • Shoot a 10- to 15-minute documentary-style video that tells your brand story and details your value proposition of your business to your target franchise buyer archetype. Cost $10K-$15K.
   • Write a 20-page case study eBook on your brand. Make a classical business case (with charts, infographics, KPIs, etc.) as to what makes the franchise unique, defensible, valuable to the customer, profitable, sustainable for the long haul, and a wise place to invest time, money, and energy for the right person. Cost $10K-$15K.
3. Train and develop your franchisee recruitment team on modern recruitment techniques. Cost $10K.
4. Hire talented recruiters who understand the new franchise buying paradigm. Cost: $8K-$10K per month plus commission.
5. Hire a C-level franchise development strategist for 6 months to replace your old tools and tactics with modern, proven techniques. Cost: $10K per month.

The Return

The typical franchisor who has mastered Key #1 should be able to ramp up accordingly:

1. Early Stage: 10 deals per year.
2. Emerging Growth: 12-30 deals per year.
3. Regional Brand: 24-40 deals per year.
4. National Brand: 40-100 deals per year.
5. Resurgent/Turnaround brands: 12-24 deals per year.

Who is FPG?

If you bring Key #1, FPG brings Keys 2-10.
www.FranchisePerformanceGroup.com

Call us 860.309.1484.