Driving Franchise Growth Understanding the Changing Landscape of Franchise Development

Objectives

● Gain actionable insights in the following areas to help you grow your franchise system:

1. Strategy – what is the right path for your business

2. Lead generation and marketing

3. Franchise development process

4. Talent management

Driving Franchise GrowthIn this Age of Disruption

● The world is changing, each of our industries are changing, but is the world of Franchise Development changing?

Begin with Strategy

● What are you trying to accomplish?

– Build a great company?

– Impact the lives of your clients?

– Building a significant recurring revenue stream?

● Are you planning to profit from franchise sales?

– The world has changed – expect to pay more!

– Do you have appropriate capitalization?

Focus on Fundamentals

● Go slow to go fast – polish your system

● ABCs of Franchise Success

– A – Franchisee Satisfaction Drives Growth

– B – Franchisee Profitability Drives Satisfaction

– C – Relationships and Trust - Glue That Holds the System Together

Disruption – What Has Changed?

● Environment – competition & costs are higher

● Lead generation landscape has changed

– Response time competition is intense

– Content marketing – telling your story vs. placing your ad

– Think like a recruiter vs. sitting under the lead tree

● Buyers journey has changed

– 57% of buyer’s journey complete before 1st contact (CEB)

– Is your team working bankers’ hours? Are you watching your site traffic?

Disruption – What Has Changed?

● Technology

– Marketing automation

– SMS (text)

– Lead scoring – all leads are not created equal

– Attribution – vs. “Home Page Leads”

– Video – >75% of internet traffic in 2018

– Machine learning

Disruption – What Has Changed?

● Exploring different expansion models

– Company owned

– Conversion or fractional franchise

– Apprenticeship/internship to ownership

– Shifting risk – franchisee fee vs. royalty

– Operating partnerships

● Demographics – Millennials

2018 Lead Gen: Year of Disruption

● FRANdata and FPG estimate approx. 15,000 new franchise starts each year.

● 3,800 estimated franchisors.

● Estimated 200-350 new concepts come out each year.

● 2015 US Census (latest avail) 414,000 new business starts. Down 10% from 2104. Lowest total in 40 years

● New business starts down 25% from historic averages.

● Surging stock market outperforming many franchisors with lower perceived risk. Unemployment at 4%, significantly down YOY

● Disruption within broker community. “Franchise Coach” is the new “business coach” and “success coach.

● Disruption in labor and real estate costs, hurting unit economics..

Implications

● Disequilibrium in Supply/Demand curve for new franchisees

● Cost-per-deal will increase over next 3 years

– From $12K to $20K in ad spend per franchisee recruited

● Fewer buyers = fewer deals

● Greater financial incentives to franchisees (downward pressure on Franchisor’s fees)

2018+

Buyer Transformation Changes Lead Gen Tactics

● Google reports that high ticket/high engagement purchases

– 70% of decision-making process is self-directed research

– Ex: Harvard Business Review auto-buying behavior

Collapsing Lead Generation and Lead Nurturing

Franchise Buyer Generation

2016 IFA/FranConnect Franchise Sales Index (5,892 deals)

1% Lead-to-closeINEFFICIENT MARKETPLACE

FPG Budget and Ad Spend Recommendations

1: Get your website right

● 43% of deal flow through website

● Website is both lead generation AND lead nurturing

● $30,000 for best-in-class website

– Redesign Every 3 years “Mobile-first” design strategy

– 2-3.5% Web Visitor-to-lead conversion for both Mobile and Desktop

– 1-2% lead-to-close

● Bad sites kill deals

FPG AD Spend RecommendationsTO

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digital and contentSEO/PPC/PRSOCIAL/RETARGET

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printtrade showsradio

Most Cost Effective Highest Cost Per Deal Highest HumanCapital CostHighly Inefficient

Expensive, unpredictable, inefficient

The Struggle for Viable Candidates and the Process of Franchise Development

Then and Now

A consultative process produces more qualified applications, and as a result, better franchisees.

Is the candidate

right for the system?

Is the system

right for the candidate?

Are you ready to buy?Has our process helped you make an

informed business decisionto become one of our franchisees?

I will give anyone their God-given

right to fail.

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Eliminate inefficiency and unnecessary costs

NO MATTER WHATCANDIDATE

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E X P L O R A T I O N

204HOURS

10 hours franchisor time wasted &10 hours franchisee time wasted

LOW-VIABILITY CANDIDATE

HIGH-VIABILITY CANDIDATE

HOURS HOURS

D E C I S I O N

16 hours sales time wasted +

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Powerful questions serve many purposes

but the right question can help you…

Make well-supported hypotheses about the candidate’s viability

Manage preventable issues that could otherwise show up in the downstream funnel

Build rapport and create a personal connection

Collect multiple data points quickly

Gain a moment to think when you’re not sure where to go next

Elicit an answer that allows you to explore a single topic in-depth

Elicit an answer that creates a springboard to a new topic

Avoid making the candidate feel they’re being interviewed or interrogated

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FINANCES SKILLS TEMPERAMENT BEHAVIOR CULTURE

Have relevant business skills and experience

OR

Show evidence of aptitude for business and mastery of necessary skills

Respect the franchise business model

AND

Understand/accept typical expectations of franchisees

Demonstrateprofessionalism and maturity while working through the process (e.g., follow-through, personal accountability, time management, social skills, emotional intelligence, etc.)

Have the necessary financial assets

OR

Have a credible way to obtain the necessary assets

D O E S T H E C A N D I D A T E . . .

To determine viability, assess the candidate holistically

Share the same kinds of fundamental beliefsand principles that motivate/guide decisions when working with each other, their employees and customers.

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Objectives

● Gain actionable insights in the following areas to help you grow your franchise system:

1. Strategy – what is the right path for your business

2. Lead generation and marketing

3. Franchise development process

4. Talent management