The latest Franchise Development and Leadership Conference has ended but the takeaways linger as brands dissect data provided by Franchise Update Media at the recent event.
Several numbers deserve attention from the Annual Franchise Development Report. 135 Franchisors participated in the survey representing 85,935 units and responded on everything from lead generation to effectiveness by channel.
First, thirty-one percent of the brands surveyed report that transfers, and franchise resales are increasing. They cite COVID as one reason for the growth in this category. As a restaurant broker specializing in franchise resales, I can report that this statistic is spot on. The latest data from BizBuySell also reinforces this finding as trending on transactions overall and for restaurants specifically are ahead of last year as published in their latest Quarterly Insights Report.
The Franchise Update Media deck reported some interesting findings when they segmented out the franchisors that are exceeding their total sales development goals for the year. The most successful brands when it comes to franchise development have some common traits.
The first commonality among these brands is their data tracking. They are laser focused on seeing the outcome from their efforts. Nearly three-quarters (74%) percent of those brands exceeding their targets in 2021 are tracking cost per lead. They know what each lead source is generating for them and the exact amount it costs to generate that potential franchisee.
Secondly, these same franchisors are diligent about tracking their cost per sale. Sixty-seven percent track this metric to learn not only what the lead cost them but more importantly, what the eventual sale cost the system. The goal of any development organization is to generate sales for the brand, so this is a critical metric. It is the ultimate measure of a successful development campaign to not only attract but convert candidates to franchisees.
Finally, however, one of the most telling statistics from the presentation was around franchise resales. As a specialist in franchise resales, it was very telling that 73% of those exceeding their goals in NEW sales development have a formal resale program.
What is the connection between a formalized franchise resale program with a brand like We Sell Restaurants and meeting your development goals? Here are some thoughts.
If new sales are simply replacing units that are going dark or closures who do not renew, you can never outsell the effort needed to hit the targets. I suspect that brands which understand this scenario have a robust relationship with a franchise resale specialist so their team can focus on new sales while their partner resource is committed to the resale and transfer elements of the business.
Secondly, transfers and resales are obviously part of the discussions around a holistic development program. It is inevitable that stores will transfer but if your existing process does not include a plan for dealing with them, it can take valuable time and effort away from the core requirement of selling new units. That’s why a strong relationship with a resale partner is invaluable in allowing the development team to focus on new sales while an external resource handles franchise resale.
Lastly, these brands are tracking costs and return very carefully. They have learned that the candidate for a brand new “blue sky” opportunity is shopping in a different place. Today’s consumer must be met where they are looking online. Those open to new development are on different channels and respond to different messages than a candidate seeking a resale. For those closely tracking metrics around the best cost per lead and cost per sale, they know their marketing dollars can only go so far. Many know it is best to allow a franchise resale specialist external to the brand target the resale candidate pool while valuable marketing dollars internally are spent on new franchisees for the system.
Overall, the Franchise Update Media report aligned with what we have known for years. Being the best at franchise development should include a focus on franchise resales, ideally with a trusted partner and resource.
See our latest franchise for sale listings online at this link.
Robin Gagnon, Certified Restaurant Broker®, MBA, CBI, CFE is the co-founder of We Sell Restaurants and industry expert in restaurant sales and valuation. Named by Nation’s Restaurant News as one of the “Most Influential Suppliers and Vendors” to the restaurant industry, her articles and expertise appear nationwide in QSR Magazine, Franchising World, Forbes, Yahoo Finance, and BizBuySell. She is the co-author of Appetite for Acquisition, an award-winning book on buying restaurants.