Mark Siebert delivers the ultimate how-to guide to employing one of the greatest growth strategies ever -- franchising. Siebert shares decades of experience, insights, and practical advice to help grow your business exponentially through franchising while avoiding the pitfalls. In this edited excerpt, Siebert explains why you have to consider these 4 elements if you want your marketing efforts to work.
Having a strong marketing message is important, but it's meaningless unless you have an audience to whom you can deliver the message.
Let’s start with a basic premise. Franchise sales rarely happen by accident. And while an occasional serious prospect may just wander in your door, most franchises are sold because a franchisor executes against a marketing plan designed to attract that prospect. Here's what yours should include:
The first step in creating your franchise marketing plan involves setting a budget. And defining an appropriate budget is almost always a balancing act between goals and available resources.
The best way to develop your growth strategy is to set a long-term goal (exit, business value, cash flow, etc.) and time frame (five years), translate that goal into a hypothetical business that can achieve it (100 franchises paying $30,000 a year in royalties, for example), and work backward to a more specific short-term objective (selling 12 franchises in the first year).
After creating growth goals using these kinds of measures, your franchise marketing budget can be developed based on industry averages. The annual franchise marketing budget can be arrived at simply by multiplying the desired number of franchises to be sold by the assumed marketing cost per franchise.
If after completing this analysis you determine the plan is too aggressive or the required capital isn't available, you have several choices:
- Reduce the short-term goals (e.g., try to sell six franchises in the first year and more in later years)
- Lengthen the time frame for achieving the goals
- Bring in outside capital (and increase goals to offset the effect of equity dilution)
- Alter the strategic approach to incorporate more aggressive tactics (e.g., plan simultaneous development of company-owned units, include an area development or area representative option)
2. Narrowing your market.
One of the most effective ways to improve your franchise marketing is to narrow your prospect profile. If your target franchise audience comprises the entire universe of franchise buyers, you'll be forced to use a very general message to attract them. More important, you'll likely need to advertise in general business or franchise publications, where you will be competing with many additional franchise opportunities.
Competing with other franchisors head to head is part of the business, but startup franchises will find lead generation more difficult. It helps to narrow the scope of your franchise prospects, narrow the focus of your message, and advertise in media that are less saturated with franchise competitors.
While intuition can provide you with a starting point, the best marketers supplement their intuition with primary research. In franchising, this research can be surprisingly simple. In addition to working with consultants (who have access to this research), you can do your own by speaking to franchisees of similar brands or by going to industry trade associations and speaking to other franchisors. Franchisees are often happy to tell you about themselves and their buying decisions, as they're accustomed to fielding phone calls from potential franchisees on the same subjects.
3. The marketing funnel.
While it's almost a cliché, it's worth restating here: Sales is a numbers game. The more money you spend on franchise marketing, the more franchises you'll sell. Franchise marketing dollars generate leads. A percentage of those leads fill out applications. A percentage of those will come in for meetings. And a percentage of those meetings will turn into franchise sales.
Of course, it is a little more complex than that. To understand the process better, the iFranchise Group developed a paradigm called the Franchise Sales Funnel. This sales funnel can help you analyze the effectiveness of current marketing efforts as well as identify areas for potential improvement.
From highest cost-per-lead to lowest, you'll generate franchise sales leads from public relations, print media, trade shows, direct mail, the internet, brokers (who provide leads for “free” but take referral fees when the franchise sells), and referrals. Not only do each of these lead sources have different associated costs for a lead, but each will have their own associated close rates:
- Leads from brokers, which are pre-qualified, will close at the highest rates.
- Public relations and referral leads will close at the next highest rates.
- Print media and trade show leads will close at about an average rate.
- Leads from the internet will generally have the lowest close rates.
But this only tells part of the story. Each of the lead sources has its own anticipated cost-per-lead, and each has a varying level of effectiveness. Public relations, for example, while providing extremely valuable leads, supplies them at a lower level of consistency than will the internet—which can deliver numerous lower-quality leads with great regularity.
So as much as you'd like to get all your leads from public relations, referrals, and brokers, you'll likely need a mix of most of the above if you hope to sell franchises with any degree of predictability.
In general, you can anticipate:
- Lead costs of between $50 and $150
- About 13.5 percent of those filling out your confidential information request form (CIRF) to convert to a sale
- Overall close rates of about 2 percent of all inquiries
- A time-to-close of about 12 to 14 weeks (longer when you first get started to account for the need to fill your sales pipeline)
The good news is, the more money you pour down the top of the funnel, the more franchises will come out the bottom. The bad news, of course, is that it's somewhat expensive (estimated at about $8,000 in 2014) to generate enough leads to sell a single franchise.
In developing your franchise marketing plan, you should be aware that timing will play a major role. For franchisors that don't have major issues with seasonality, the franchise marketing budget can be optimized by spending advertising dollars more aggressively at certain times of the year.
Generally speaking, franchise buyers go into hibernation in November and December. At that time of year, people are preoccupied with the holidays and are less concerned with making life-altering decisions. Likewise, there is a period in the heart of summer, when prospective franchisees are more focused on family time and vacations than they are with buying a business.
By contrast, January through March is prime lead-generation season for most franchisors. When January comes, it's time for New Year’s resolutions and reflecting on where our lives have taken us. Moreover, the franchise buying process always starts with something—a bonus, the lack of a bonus, the lack of a raise, a bad review, a layoff -- and the beginning of the year is often filled with those special “somethings.”
The spring and fall tend to bring relatively average franchise buying activity. But bear in mind that it takes about 12 weeks to close the average franchise sale, so factor that in when determining the timing of your ad spend.
The more complicated situation, of course, occurs when you are selling a franchise that is itself highly seasonal. If the seasonality of a business is profound, savvy franchisors probably won't want to have franchisees opening their doors in the beginning or the middle of the season (when they might be overwhelmed) or at the end of the season (when they might struggle until the following season). Instead, franchisors would be well-advised to have franchisees open at a strategic interval prior to the opening of the season.
To accomplish this, the seasonal franchisor should start with the ideal opening time and work backwards into its franchise advertising “high season.” In a retail environment, that might mean working backwards from the grand opening through build-out through site selection through training through the sales process.
Of course, none of these are hard-and-fast rules. Franchisees for most systems can be recruited throughout the year, and openings for almost any business can be accommodated out of season -- as long as the franchisee is adequately prepared (financially or operationally) for the implications of this counter-seasonal opening.