Key Franchise Recruitment Takeaways from 2011 Franchise Update Conference

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Franchise sales advice – what’s ahead for 2012

I’m traveling back to Nashville from the 2011 Franchise Update conference, one of the premier events for anyone responsible for franchisee recruitment results. The IFA reports franchisors added 19,000 new units since the same time last year. While this is up from last year, when one considers the unemployment rate is 9% and Gallup estimates almost 30 million of the existing workforce is underemployed, there is a huge bubble of people who can throw their hat in the ring and start a franchise if finances allow.

While most franchisors in attendance were not hitting their growth objectives, many reported increases over 2010 and deal flow was up overall. Traditional lead sources are not producing the predictable number of deals they used to. Franchise sales metrics are changing to reflect changes in buyer behavior. For instance, “Star Award Winners,” those designated as the best-of-the-best in franchisee recruitment, struggle to reach 30% of their inquiries and tell their story. Many Franchisees who signed up during the go-go times of 2000-2008 in retrospect should never have been awarded a franchise and they require more levels of support than thinly stretched operations managers can provide.

Negative franchisee validation is hurting franchise sales and lower than should-be average unit sales is hurting franchisors’ ability to access more expansion capital. This “double whammy” is driving franchisors to focus on the fundamentals of their business, such as increasing franchisee profitability. Here are some of my other big take-aways from the event:

Franchisors who grew the most claim the strong unit level economics and trusting relationships with franchisees. Implications: the greatest predictor of future growth is current franchisee satisfaction level and profitability. No surprise here. The real surprise was how frequently the importance of training and operations came up in a conference dedicated to franchise sales! When I sold franchises, there was often tension between franchise recruiters and operations staff. Today, franchise salespeople seem to have a much deeper appreciation for what operations teams are up against, how hard their jobs are and what their impact is on franchisee recruitment results. I would expect more franchise sales and operational support group hugs in the future.

The greatest source of new franchisees was franchisee referrals. Steve Olson, Publisher of Franchise Update, indicated franchisee referral has never before been the number one source of leads in the survey’s long history. Implications: franchisee and customer referred leads are often a better culture fit, don’t often shop multiple opportunities, and certainly less expensive to generate. Franchisors understand they need to invest more time, money, and energy to farm these leads.

Future of franchise brokers and consultants. There was a general sense among many attendees using brokers that broker fees are starting to exceed their perceived value and some broker resentment is kicking in. Franchisors in attendance often spoke about wanting to break their franchise development department’s dependency cycle on broker leads. Several franchisors reported 60% or more of their deals come through the broker networks. Implication: the average acquisition cost per close with a broker was above $20k. This is more than double the norm for all other sources – $8-10k. This kills margins from the franchise fee and over time may negatively impact a cash-strapped franchisor’s ability to train and support new franchisees while they are waiting for royalties to ramp up to acceptable and profitable levels. If franchisors relearn how to generate their own leads and crack the code for lead generation through social media and organic searches, more and more franchisors will sever broker relationships or refuse pressure to increase commissions.

Focus on engagement vs lead count. Franchisors are moving away from “how do I generate more leads” to “how do I engage qualified buyers.” This is a game-changing attititude shift. Expect more franchise systems to change advertising spending away from “more and more” leads to focusing on reaching fewer, but a more targeted and qualified lead pool. Expect some franchisors to crack the code in how to use social media and targeted PR to drive traffic and improve search positions in order to fill their pipeline. In addition expect franchisors to make more strategic investments in creating content to keep leads engaged throughout the process.

Franchise development websites are more important than ever. Several franchisors shared web analytics from their franchise opportunity website. The average time spent on the site was 3-5 minutes and average bounce rates were about 60% or more. There is an evolving shift in website design and use of content today. Implications: franchisors need to engage candidates online and inspire them to want to learn more. Stop thinking of your website as an eight page brochure and start thinking about it as a daily newspaper with you as the publisher. The website is no longer a teaser designed to get someone to fill out a form; it is your home base online. Publish as much content as possible to tickle the interest of your target candidate and work hard to increase time on your site and reduce bounce rates for your core content. A shockingly small number of franchisors maintained a consistent franchise sales blog or post content designed to keep engaged leads coming back during the sales process even though this is the easiest way to improve the important website metrics.

Greatest source of Internet generated leads was organic search engine results and not portals. With Google’s Panda update to the search algorithm and more franchisors ditching flashy, highly animated websites in favor of WordPress-driven, content heavy, and search engine optimized websites with an integrated blog. Expect franchisors to invest more in smart organic SEO lead generation and content strategies. Panda provides franchisors and immediate opportunity to drive traffic away from the portals and towards their own franchise sales websites. Implications: time to rethink and possibly reinvent your franchise development website. In addition, franchisors need to get ahead of their competition and develop a finely tuned, consistently executed content strategy to drive traffic to their website, to intersect leads who are actively engaged in a competitor’s process, and keep candidates engaged in their own process. While it may not be easy, and may not be inexpensive, all indicators point to the idea, “content is king” and it will yielding long term results to those who stick with it and crack the code.. The more visibility you have online, the greater your ability to engage more candidates.

More rough economic times ahead. Darrell Johnson of FRANdata reported economic trends were not favorable and expects more uncertainty and “ups and down” of the market. Implications: franchise salespeople are going to need to deal with and overcome candidates’ fear of the unknown. Simply put, franchisors are going to need to train or ditch mediocre recruiters. Their job is going to become increasingly harder and will require new skills such as writing and social media savvy. Franchise recruiters will need to need to do more with less leads.

The renewed focus on franchisee profitability is changing franchisor’s franchisee recruiting approach. A sales and marketing consultant from outside of franchising took me aside after a session I moderated and asked in disbelief, “Why isn’t anyone talking about selling? I thought this was a sales conference?” Franchisors have switched from talking about sales language such as “closing deals,” “trial closes,” “features and benefits” and “hot prospects” to using ‘recruiter language’ such as “educating the candidate,” “fit” and “probability of success.” Implications: Franchisors may need to retrain franchise salespeople in recruitment skills (such as interviewing and active listenting) rather than sales techniques; candidates have become expert at recognizing when they are ‘being sold’ and are amazingly good at filtering out advertising messages. Good recruiters are going to learn to let candidates sell themselves on your franchise.

Content, content, content. Scott Klososky, social media expert, opened attendees’ eyes with the power of relevant content and the impact of steady streams of engaging content on buying behavior. Implications: franchisors are changing their perception of social media from “it doesn’t work to recruit franchisees” to “my current strategy doesn’t work.” I would expect franchisors to make key investments in development of more engaging content, reaching people sitting on the sidelines who already have a relationship with their brand or use the content to develop this relationship. Some franchisors are getting good results using content strategies and I’d expect more to do the same.

Create an incentive for franchisees and customers to recruit. Some franchisors are paying 10K or more to franchisees and customers who refer leads. Franchisors pay a broker $20k or more for a qualified lead, yet the most engaged leads often come from people who know existing franchisees and have already seen and experienced the business firsthand. Implication: franchisors will start paying internal referrals more often and doing more to enlist the support and help of existing owners.

Don’t forget mobile marketing. Few franchisors appear to be using text messages and mobile marketing to request initial appointments. Seems so obvious, but few are doing it. Implications: we are all too old!

Did you attend Franchise Update? What were your big takeaways?