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How the Internet is Impacting Franchise Sales
In August, 2005 The Franchise Performance Group polled a random sampling of more than 40 franchisors about lead generation.
41% of franchisors are spending more than $100,000 in advertising for franchisee recruitment.
Franchisors are reporting the cost per lead from the internet ranges from $40 to $70. In the same poll, franchisors report closing on average 1% or less of these leads. Therefore the cost per recruiting a franchisee on the internet will range from $4000 to $7000. To aggressively grow your chain (adding 20 or more franchisees a year), you should anticipate spending at least $100,000 a year in franchisee recruitment advertising.
When asked, “What is your most productive source for new franchisees?
51% of franchisors responded “Franchise Opportunity Websites.”
The internet is dramatically changing how franchisors generate and work leads. Telephone contacts are becoming less and less effective. 70% of franchisors reported reaching 40% or less of their franchisees by telephone. In the past franchisors used to be easily able to reach 80% or more of their leads. Now franchisors struggle to reach 40% of more.
This has serious implications. Franchisors are going to have to rely on email, website and other forms of electronic communication to educate leads on their franchise concept. Most internet leads will not take follow up calls. Franchisee recruitment appears to be in the middle of a franchise buyer behavior transformation. Where is this going? Who knows! However, perhaps we can learn from the transformation which occurred in residential real estate.
A poll sponsored by the National Association of Realtors showed distinct differences between the buying behaviors demonstrated by internet buyers and traditional home buyers. Those differences are as follows.
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Traditional Home Buyer
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Internet Home Buyer
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Typically have purchased one or more homes before.
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Typically a first time home buyers. Young, affluent, well-educated.
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Spend 2 days looking at homes before contacting real estate agent.
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Spend 6 weeks looking at homes before contacting a real estate agent.
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Takes 7 weeks to make a decision.
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Takes 2 weeks to make a decision.
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Looks at 15 homes before making a decision.
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Looks at 7 homes before making a decision.
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Rely on real estate agents to provide information on neighborhoods and guide them through the home buying process, such as financing.
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Learns about homes/neighborhoods/school systems/financing and home buying process on the internet BEFORE contacting real estate agent.
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Communicated with real estate agent every 6-7 days
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Communicated with real estate agent every 4-5 days. ALMOST 9 OUT OF 10 COMMUNICATIONS WERE EMAIL!
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Needed assistance understanding needs, wants and what they could afford.
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Possess a good understanding of what they want and could afford prior to contacting real estate agent.
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Additionally, internet home buyers indicated they felt more empowered, better educated, and indicated they were MORE SATISFIED with their home purchasing experience and real estate agent services than traditional home buyers.
Possible Implications for Franchising
- Franchisors have to be more generous with information via the web. Let the internet buyer freely gather the information they desire without unnecessary constraints. Plug into their process rather than forcing them into yours. Send leads automatic email responses (or "drips" as they are also known) educating them on the franchise, updating th em on news and announcements.
- Franchisors have to be able to offer internet franchise buyers information the way these buyers gather information and make decisions rather than forcing them into an old process they refuse to follow (remember franchisors are only contacting 40% of their leads, which is cut in half from just a few years ago).
- Franchise
Opportunity
websites need to let franchise buyers click through to franchisor’s website to gather more information. Franchisors will need to start offering additional information to prospective franchisees such information as…
- Franchising and what it is to be a franchisee.
- Financing.
- How to invest in a franchise. What to consider before buying.
- Investigation steps (the franchisor’s sales process).
- Industry data.
- Customer profile.
- Profile of a successful franchisee. Possibly on-line assessments.
- Location availability.
- Company bios.
- Franchise salespeople need to become better organized (as franchisors will generate more leads more cost effectively), more computer savvy and better written communicators (as more contacts and information will be delivered by email than telephone or face-to-face communications). It is possible franchise salespeople are going to need to track more data and spend much time in front of a computer all day reading and responding to emails. This may change the profile of who a franchisor needs to hire as a franchise salesperson.
- Franchisors will need to create more letter templates and more customizable written communications to help franchise salespeople be more effective and deliver more communications quicker, without having to write the same emails over and over again.
- Franchisors need to fast track candidates, as many will enter the process “pre-sold” and ready to buy. However, franchisors need to resist the temptation to not properly qualify and screen potential candidates who demonstrate a strong willingness to buy.
Do you need help putting together an effective internet lead follow up strategy? Call the Franchise Performance Group at 860-567-3099.
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