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TRUSTED GLOBALLY FOR OVER 30 YEARS IN FRANCHISING

Franchise Sales Index Update Showed Impressive Sales Gains and Efficiency in Third Quarter of 2021 – What Your Brand Should Be Doing Now to Capitalize

 

Every year, FranConnect compiles a data-driven report analyzing the state of franchise sales. This annual Franchise Sales Index Report is based on anonymized and aggregated performance data from over 600 franchise brands and gives insights into trends and franchise development performance.

 

 

 

We recently conducted a quarterly update to the report, comparing the first half of 2021 to the second half of 2020 and capturing a notable rebound for the franchising industry in the third quarter of 2021.

Franchisors can take heart in key findings of the analysis, which showed significant increases in lead flow and much greater sales efficiency. The monthly number of franchise deals closed per brand in the third quarter nearly doubled as compared to the first six months of the year. In addition, the lead-to-deal ratio increased by 60%, showing an impressive gain in effectiveness for franchise sales over the preceding six months.

This data is representative of brands of all sizes, from micro-emerging (18% of total) to enterprise (21%) and all points in between (39% emerging, 23% mid-market). While 71% of the brands surveyed are in the categories of Personal Services, Quick Serve and Fast Casual Restaurants and Commercial/ Residential Services, the data also includes industries such as Business Services, Retail Food, Retail Products/ Services, Table Full Service, Automotive and Lodging.

Our data revealed several trends that are impacting franchisors regardless of their size or industry segment.

The role of trust

One of the most impactful takeaways is the role of trust. Trust has become the most important currency in franchise development.

The highest lead-to-deal ratios are from trusted sources such as referrals, which increased in the first half of 2021 and again in the third quarter averaging almost 7% from 4% over the last half of 2020. If you got a lead, you had an exponentially higher likelihood of closing it if that lead came as a referral.

Leads from franchise referral consultants closed at almost 6% in the first half of 2021 compared to almost 5% in the second half of 2020. The third highest lead-to-deal closing ratios were from organic leads (unpaid inbound leads), which closed at 4.5% compared to 4.4%. These are often your own customers who have established a trusting relationship with you.

These ratios significantly eclipse those from all sources, which came in at an average of 1.5% (also an improvement over 1.1% lead-to-deals in 2020).

The takeaways for franchisors:

1 – A rising tide lifts all boats. Explain these benefits to your franchisees beginning at Discovery Days, through initial training, internal conferences, etc: As more franchisees come into the system, more dollars are contributed to brand marketing. New franchisees also help keep out competitive intrusions in the markets they develop. Help franchisees understand that a referred franchisee that joins is good for them and good for the brand.

2 – Respond quickly to franchise referral consultant (broker) leads. Brokers tend to make more introductions to franchise development teams that have a proven record in closing deals. If you are making more sales, you will get more broker leads. We all have a tendency to favor those credible individuals that we know, like and trust.

The power of the website

Website leads are gold, and here’s the proof: Website lead-to-deal conversion rates increased by over 83% in the first half of 2021 from the previous six months. These leads are further on in their discovery and research, and they are honing in on the brands that would be the best fit for them.

The takeaways for franchisors:

1 – Franchise websites require more video content – including franchisee testimonials – throughout the active sales process and specific to each stage. Sales marketing campaigns should be set up so that new leads receive relevant content based on their stage in the sales process. New leads should hear why your industry and brand is thriving. Those in the Discovery Day campaign stage want content about what to expect when they meet the team so their fears and uncertainties are addressed. When they are in FDD review, instruct them on how to read the document and direct them to Item 19. In every step of the sales process, there is an opportunity to provide relevant omni-channel email, video and text content.

2 – Don’t incorrectly assume that website leads are better than portal leads. The quality is there in these early-stage leads, and franchisors need to recognize this. While portal leads will require more time since they are just learning about franchising and the opportunities available, they are the second-highest source of leads that come into a system. It may be painful to think about chasing these individuals, but you will get a larger number of net deals from portals.

3 – Speed to lead is more important than ever. In the first half of 2021, 82% of all deals closed were with leads that were engaged within four hours or less. Whether you do it with human labor or AI technology, you have to reach these prospects where they are and when they are there. Many in franchise sales say they don’t want to look like they are stalking a prospect by responding too fast via phone or computer, but data shows that giving them a day or two will cost you the deal.

The power of technology

With 68% of leads coming in after business hours and on weekends/holidays, smart sales teams are taking advantage of AI with advanced workflows to engage people just like a human would – in natural language – no matter the time of day. Technology can help with the holy trinity of franchise development: speed to the lead, booking the appointment and keeping the appointment. FranConnect data shows technology users are doubling the number of prospects that become leads and enjoying a 40+% increase in the amount of leads that become deals, all without an additional spend on advertising.

This is not the time to be conservative with your marketing budgets. People are buying, and lenders have money to loan. Franchisors that have a strong brand message, a good story to tell and franchisees willing to provide validation are going to get more deals now. Every indication we are seeing shows that franchise sales are ready to surpass pre-COVID levels, so now is the time to focus on executing at your highest levels of efficiency and effectiveness with data-driven best practices.

 

 

Keith Gerson, CFE

Keith has over 47 years of executive-level expertise creating and building leading franchise systems. A highly respected thought leader, Keith works closely with many of FranConnect’s customers’ Executive Teams. His books, webinars, and keynote addresses have created a large following. Many of his webinars can be found in the FranConnect Webinar Library.