Franchise Development Takeaways from the 2015 International Franchise Association Convention

Challenging but exciting time for the franchise industry

By Thomas Scott and Joe Mathews

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Connect. Innovate. Evolve.

This year’s International Franchise Association theme summed up a pressing problem that has been hamstringing the franchise industry throughout the recession and beyond: franchisors, especially franchise development executives and recruiters, have been slow to adapt their practices to meet changing and more self-directed franchise buyer behavior.

And if there was a theme this year, it was that  franchise companies can grow if they relearn and reinvent how to connect meaningfully with franchise candidates.

This was evident in the two packed super sessions on Monday morning, which were side by side: The Digital Marketing Summit was a very forward thinking and packed room full of people acknowledging these changes in buying behavior and working hard to bridge the gap that exists how customers and investors wish to gather information and make investment and buying decisions. Scott Klososky, Partner with Future Point of View, led franchisors down a clear path that gave franchisors clear action steps. It was a high-energy session full of actionable takeaways.

2015 IFA Conference

Across the hall in the Franchise Development Forum, a highly experienced team of franchise development executives discussed anecdotally what worked for them in the past with little discussion about the relevancy of these practices in the near future and how to keep up with or stay ahead of changes in buying behavior, revolutions in technology, or what will happen when the boomers stop investing and the Gen X, Gen Y, and Millennials throw their hat in the ring.

One item Scott Klososky mentioned was that executives at non-franchise companies, especially those in their 50s-60s, really struggle with the rapid changes in buyer behavior and technology and are slow to adapt to changes in the industry.  He used the example of how Sears and LL Bean, both more than 100 years old, went on radically different trajectories. Sears was unable to see the rise of the internet and clinged to old ways and as a direct result, almost went out of business. You can almost hear the echo of past board meetings.  “We are not concerned about the ‘www-dot-interweb thingy. When customers want Craftsmen Tools, they will come into the store. We are Sears and we will always be here.”  LL Bean, largely a catalogue retailer, saw ecommerce as a disruptive technology and a threat to their core business.  They adapted early to online shopping and have experienced record growth.

Klososky said Companies will rely on old ways of doing things and will tell you things are great, right up until the moment they fail.

Here are our takeaways for franchise development from this year’s conference:

Franchise Buyer Behavior is Changing: Geoff Hill, VP of Roark Capital which owns Arby’s and several other brands, commented that he’s been amazed at the rapid changes in the way he sees franchise buyers researching and moving through the sales process.

Franchise buyers are doing more research and thanks to smartphone technology, have access to a wide array of information sources 24/7. Buyers want more control over the sales process and will gravitate to franchise companies who give them easy and unfettered access to the information they want.  As a general rule, franchise companies are understanding the old skimpy 6-8 page “online brochure pretending to be a website” franchise opportunity tabs are as antiquated and useful as pet rocks.  We are still amazed at the number of franchisors who are still having budget discussions about the possibility of upgrading franchise opportunity websites and creating other forms of online franchise opportunity content strategies.  It’s like being trapped underwater and discussing the possibility of someday needing oxygen.

The Era of Self Service: Jay Capperella, VP of Franchising for Fantastic Sams had this to say: ‘If I find myself thinking here’s what I want my prospect to do, I’ve realized that I’m approaching my candidate from the wrong perspective. What I need to be thinking – and the way you think is the way you act – is what does my candidate need? What do they want? How can I help them make a well informed decision?’

“Jay Cap,” as he affectionately known,  is spot on, which is why he is on the top of his game.  Notice his language.  He isn’t asking, “How do I sell more franchises?” He asks, “How do I help and inform more people?  How do I make it easier for them to buy?  How do I find new ways to improve their condition?”

This is not a subtle change of thinking.  THIS IS REVOLUTION.

Now put yourself in the shoes of the investor.  Let’s assume you are lucky enough to reach a recruiter like Jay Cap and you immediately become clear that he believes his job is to educate and inform you about what the business is and isn’t and help you self-determine if this business is right for you.  Would you trust him?  Would you want to do business with him?  Would you answer his questions?  Would you divulge your concerns and share personal information?

Here is our dire warning to franchise salespeople everywhere.  You are a dinosaur.  Your way of acting, thinking, and being is over.  You are irrelevant in the marketplace.  Soon, you are going to wake up and find yourself in the career version of the La Brea tar pits.

Franchisee buyers don’t appreciate slick and polished.  They value “authenticity” and “transparency.”  They don’t care about your expensive hair cuts, luxury watches, and pocket squares.  They want straight conversation with people they can trust. Most of all, they don’t care about your sales process or your conversion rates. They simply want to buy and each investor has an individual buying process.

To be successful in this new era, franchise salespeople don’t need to change what they are doing.  They need to alter who they are being.  We aren’t talking about behavioral change.  We are talking about PERSONAL TRANSFORMATION AND REINVENTION.

Next time you hear franchise salespeople talking about “handling objections,”“closing techniques” “deal speed” and “taking control of the franchise sales process,” or “killing it,”  pretend you are in the Museum of Franchising Natural History looking at the caveman exhibit.

Additionally, If you meet Jay Cap in the hall of next year’s IFA, you won’t see a high powered best-in-class franchise salesperson.  You will immediately see a guy you can easily connect to and know you can trust.  You will feel safe talking to him and find yourself opening up more than usual.  So do franchise candidates.  That’s what makes him best in class.  If you want a long and lucrative career in franchisee recruitment, don’t do what Jay Cap does.  Be who he is.  Your results will appear effortless.

Technology will match buying behavior: Scott Klosokly termed this the ‘era of self service.’ Franchise buyers want to have self-service control of the research section of purchasing a franchise. We’ve been seeing this for the past few years. Now, franchise candidates are wanting to do self-service buying, meaning they want to get further into the process with as little conversation from a salesperson as possible. How franchise development teams evolve to handle this is going to be a strain as not only are sales processes and sales skills lagging but the technology platforms in our industry are also far behind where they need to be. Expect a disruptive vendor for CRM technology to emerge and get astonishing results if the current platforms don’t quickly take advantage of the gap. Franchise prospects want to research and buy in ways that are not consistent with the way most development teams want to sell and recruit. The lesson this year: dismiss this in favor of what’s familiar and comfortable and face a significant risk of failure.

Often regarding franchising best-practices, franchise suppliers are often domain area experts, not the individual franchisors: Franchise executives are often limited in experience, deriving their opinions from a handful of brands often in the same industries like food service. At past IFA conferences, there has been a push to promote successful franchisors – something we applaud – and  minimize the voice of cheesy suppliers who often turn prime educational sessions into crappy, “cringeworthy” infomercials.  But more and more domain area experts are emerging.  There have always been franchise attorneys.  Now there are franchisee recruitment experts, franchise lead generation experts, franchisee-franchisor relationship experts, and so on.

As a former IFA Supplier Board Member, we’ve often felt that Suppliers were the red-headed stepchildren of the convention.  For instance Supplier Business Roundtables are the last item of the last day of the conference, long after most franchisors have left.  We earned this stepchild status by being cringeworthy and self-promoting.  I hope this year represents a break from the past and gives supplier domain area experts the same seat at the table as franchise executives have.

This year we saw domain expert suppliers step up, drop their personal agendas, and present great content and actionable ideas.

The Franchise Recruitment Website is your #1 Asset and it needs to perform at a high rate. Every lead generation and franchise sales marketing session we attended talked the importance of a dedicated franchise opportunity website. Opinions varied.

We heard two PR agencies talk about how the website doesn’t really matter, that if you build brand awareness via PR (and hire them), you just need to have a basic site. We even listened to one PR agency talk about how they divert interest away from the franchisor’s website to a microsite they build and manage which  was a real head scratcher. While it’s great for a PR agency to leverage the franchisor’s brand to try to drive their own agenda and monetize what should have been the franchisor’s traffic, what’s in it for the franchisor?  Imagine a franchisor paying for this “privilege!”  We aren’t asserting people are doing anything nefarious, but we are absolutely asserting there are two types of groups:  Those that get it and those that don’t.  Franchisors better get it fast and do business with those who do.

In the age of self-service research and buying, the franchise recruitment website is the single most important part of your expansion effort. Franchise buyers – the prospects that are qualified, have the necessary skills and can open in an available territory – have an appetite for specific information. We’ve tracked franchise buyers from all of our websites and the data is conclusive: franchise buyers have an appetite for at least 45 minutes of information. That’s at least 30 pages of 400 words per page (more than one written page of a Word document).

Slow down and think about this problem: if your buyer wants to spend 45 minutes on your site, but you design a site to keep their interest for 5 minutes, what do think happens?

Besides lack of structure and content, franchise development executives appear to have difficulty in measuring how effective the website is. In one session a franchise executive told the audience they need to evaluate the effectiveness of their franchise opportunity website.  Someone asked what specific criteria and measures should a franchisor use to determine whether or not there is a problem.  The executive who presented the content stammered and stuttered, and didn’t answer the question.  No one on the panel chimed in – this from a panel whose careers spanned 70 years and who recruited thousands of franchisees.

As a community, we need to move beyond “our gut” and get into statistical measures.

That’s a mistake; measuring performance of your franchise recruitment website is easy. Take the number of leads you get in  a typical month and divide it by the number of unique visitors you had on your website. This is basic math: if you had 2,000 unique visitors and generated 30 leads, that’s a conversion rate of 1.5%. Thats close to the average conversion rate for the industry and its subpar. If your website has a 1.5% conversion rate, time to rethink your digital strategy. Josh Wall, VP of Development for Christian Brothers Automotive had a 9.5% conversion rate on his website. Dwayne Tanner from Chem-Dry Carpet Cleaning had an astonishing 11.5% conversion rate.  FPG believe minimal acceptable performance is 4%.  What is the payout?  Again simple math.

 

Unique Visitors UV to Lead Conv % Totals leads Leads to franchisee conversion % Number of New Franchisees Assuming $30K FFee, projected revenue
2000 1.5% 30 per month, 360 per year 1% 3–4 franchisees per year $90-120K
2000 5% 100 per month, 1200 per year 1% 12 $360K

 

Considering it costs 25-30K to design a state of the art website which converts at 5%, it’s a no-brainer return on investment.

And if anyone recommends that you should divert your web traffic to their site, say, “Sure  How would you like to be invoiced $1 million lost franchisee fee revenue and royalty revenue and shareholder equity….cash or credit?”

The 1-800 number makes a comeback: If you’ve been in franchising for longer than ten years, you remember how important toll-free numbers were for franchise recruiters. Being on call to answer the ‘money phone’ was a popular duty and often resulted in sales; prospects who call in are simply more engaged and you can jump right into the sales process.

In the past ten years, the toll free number disappeared from franchise marketing in favor of web based lead forms. Now that almost half of visitors to recruitment websites are on mobile devices – a trend that isn’t going away – the number of people choosing to opt in from a phone number is rising.

We noticed something really interesting this past year. One dominant chicken brand reported in a presentation at the Franchise Update conference that they received few calls; perhaps 3-4 a month.. At the same time, brands like Midas, Menchie’s and Marco’s Pizza received well in excess of 100 phone leads a month, most created by responsive recruitment websites that made it easier for leads to opt in on a smartphone.

Why such a difference? Website design.  Some sites are designed to anticipate the needs of visitors on smart phones.  Others break down if the visitor isn’t on a desktop or laptop

At the same time, franchise development teams are poorly setup to work phone leads. Few have trackable numbers and understand the analytics around phone conversions as opposed to web form conversions. Most just forward the phone to a receptionist or the recruiter’s cell phone, both bad ideas. Franchise buyers who use a phone number to opt in – and not all calls are buyers – don’t usually leave a message and also don’t fill out forms so unless you can engage them 24 / 7, you are going to miss deals. Mixed among legitimate leads will be customer services complaints, job requests, etc.  Since many of these calls are made after hours, we recommend hiring a service to sort this out and direct the caller to the right audience.

Chem-Dry Carpet Cleaning used a call answering service to handle these telephone leads and signed a 3-unit agreement.  Think about the return on that investment.

Texting is the new email: During our panel discussion on changing franchise buyer behavior, we showed a breakthrough Danielle Wright, a recruiter with College Hunks created. She uses Google Voice to text leads as part of her aggressive call response approach. She calls, leaves a voicemail, sends and email, texts, then calls again, all within the first 30-45 mins of when a lead comes in. The result? Her contact rate is double what the company had before she started and the pipeline of non-broker leads is 3 times the size. Some of this is from good lead generation and a lot is simply a recruiter doing what every recruiter should be doing: calling quickly, being responsive and hanging with a lead long enough to exhaust all possible ways to communicate with them.

Google voice is a cloud based app anyone can use to text. You don’t have to use your personal cell phone and if you have a text based conversation with a prospect in Google voice, it is easy to cut and paste into the CRM.

At the roundtable sessions the next day, I spoke with two people who implemented this easy system right after our panel. One texted all seven leads and got a 100% contact rate. The other got twice the contact rate she’d been getting. This is an easy, actionable takeaway everyone should use. Texting is a friendlier way of communicating with prospects that gives them control but also creates more visibility to what you are asking of them. Unlike a phone call, email or voicemail which require the prospect to do something, a text message just pops us and can be read so you communicate much more clearly. If you are a recruiter, start doing this today. If you manage recruiters, require it on 100% of your inbound leads. It will make a noticeable difference.

Behavior profiling in high demand: in several franchise sales sessions, the use of behavior profiling came up often. We like behavior profiling – using a test like a DISC test to measure the behavior and communication styles of a prospect. Tests like these can help a recruiter close more deals by helping the adapt their own communication and behavior styles to match a candidate’s. They can also give you insight into skills fit – which franchisees do better in a younger, less structured system, which might be better following detailed systems and which may be poor or excellent at sales and marketing.

They are not a silver bullet, though, and a lot of systems use them in the wrong way. They should never be used as a qualifier or used to weed someone out; they are excellent to create conversations about fit and skills that might not get noticed otherwise.

They also don’t tell you about drive, character, ethics, morals or discernment. You can’t tell if someone is a liar, is lazy, has situational ethics or lacks drive. We like them and they can help a team improve sales results – just be careful not to use them to pigeonhole a candidate. They should just be an excellent tool to help your recruiter get better access and understanding into a candidate’s goals and motivations.

Changing use of the FDD in the sales process: One takeaway we loved was that teams are waking up to more effective ways to introduce the FDD into the sales process. In our roundtable discussion on Sales Process Tactics that Work, we saw some really differing ways people use the FDD. Some were excellent and some were not well thought out.

Here’s what we use with our outsourced recruiters and what is quickly evolving as a best practice:

Make the mini application or basic financial statement the price for getting the FDD. Don’t send the FDD out before you’ve really spend time with a candidate and really understand their goals and have had time to walk them through the business, usually 2-4 hours of conversation.

Don’t send the FDD to a candidate before you review it with them. This is a common mistake recruiters make – just blast off the FDD to the candidate without any type of review or explanation. FDDs are not friendly and even the best written one is full of dense, often one-side language. Shooting it off before a review is a guaranteed way to cost yourself deals.

Schedule a webinar and physically walk your candidate through the FDD. Explain what the sections are, explain what is normally non-negotiable and what isn’t as well as give the back story and context to the items in your disclosure. This is an easy step to skip and you would be surprised how easy it is to slip into  the habit of just shooting it out to candidates.

Our advice: don’t. Use this step as a way to help overcome one of the roughest steps in the sales process and help your candidates understand the FDD as you do.

Multi Unit Franchisees might not be who you should recruit: We heard this story from several people at the conference this year: many brands are rethinking how they target multi-unit owners and some are rethinking targeting multi-unit owners at all. We understand why a franchise system would want to recruit multi-unit owners: they are attractive because you only make one sale and get several locations, have a more sophisticated owner who might ramp up faster and theoretically would need less support? Sounds like a win, right?

Geoff Hill also mentioned in his panel that when his company looked at its multi-unit owners, the most successful were not prior multi-unit owners. Surprisingly, they were lawyers, corporate manager or just people with business experience. THis was a wake-up call for him; he began thinking differently about who to recruit and who would make a successful multi-unit owner in the long run.

We see this in a lot of our clients: the people who often become top performers start out as a single unit owner and once they master the system, expand rapidly. We think this is an important lesson from the conference – if you are tasked with growing, think more broadly about what type of owner can succeed and look to your existing top performers for an idea who this might be. You might just be surprised.


2015 is shaping up to be a great year for franchising. These were our takeaways from this year for franchise development executives and we’re curious to hear what yours were. As always, this is a great time to share and learn and hopefully evolve in the year ahead.

What did you learn at the conference?