It is a common concern among new franchisors: We have built an attractive franchise offering, we’ve paid the lawyers, registered the FDD, and hired the franchise specialists. Now, where do we locate and recruit new franchisees?
I have been asked this question a dozen times by franchisor clients. Part of the answer to the question is that recruiting franchisees is an art, and success will grow out of a combination of franchisor efforts. Those efforts will have a number of moving parts, and like so many aspects of business art, there is no one easy answer. Here are some of the best sources:
Existing Stores. The leading dynamic of recruiting new franchisees, and the one most often surprising to businesspeople new to franchising, is the role played by the existing businesses, either company-owned or newly franchised. An operating business that is vibrant, crowded with customers, fresh, fun or different, conveys the strongest possible message to anyone with an entrepreneurial eye. Word-of-mouth is a powerful recruiting tool. A smart franchisor knows that among its customers there is a healthy percentage of potential franchisees. Recognizing this, many franchise systems focus on encouraging local press coverage, and place franchise promotional brochures right on the service counter of each location.
Trade Shows. Some franchisors swear by franchise and business opportunity trade shows, and I have several franchisor clients who report great success in generating high-quality leads from them. A trade show does more than generate a random list of people: It gives the franchisor an opportunity to see prospects face-to-face, discuss the program, gauge levels of interest, and determine if there is a psychological “fit.” With this information, a franchisor can grade its leads, and follow-up can be that much more effective.
However, a few of my franchisor clients have been badly disillusioned with franchise trade shows, finding them both extremely expensive and time-consuming. One franchisor president told me after one of the biggest trade shows in the country that he generated only a few leads and was out about $10,000 for the cost of the weekend. He was one unhappy camper.
The only way to find out if trade shows work for you is to try them. But before you do, find out as much as you can about the shows you are considering. Talk to other franchisors who have attended to get the pros and cons. Get as much information as you can from the show promoters about the number and quality of attendees. You may even want to go to a show as an attendee rather than as an exhibitor just to feel it out and to see what tactics the booths that get a lot of leads are using.
Traditional Advertising. Print advertising is common in franchising, of course. Many general business magazines as well as industry-specific trade magazines feature franchise advertising. One leading interior design franchise system focuses its advertising in trade magazines for the interior design industry, and reports a strong response. There is considerable debate among franchisors as to the effectiveness of print ads. Some think that a franchisor has no choice but to be in the print advertising arena, and others will tell you that the business advertising world has completely shifted to . . .
The Internet. This burgeoning marketplace has exploded with franchise advertising, links, promoters, brokers, lead generators, packagers, hucksters, and con artists. In other words, um, it’s the Internet. Franchisors have been beefing up their Web sites in the past few years, aware that prospects will come to their sites – the official source – for detailed and reliable information about the franchise program from any number of places on the Net. A new franchisor should consider the quality and the power of its Web site. How is it set up to receive prospective investors, and is it delivering detailed, interesting, compelling information about the franchise program? The company should also consider making franchise disclosure information available on its Web site; make it password-protected so that prospects must register to find the information and the company knows who is receiving its disclosure documents.
Franchise Brokers. The Internet has spawned a new breed of franchise broker; they are often huge national networks of loosely affiliated business brokers that pool their sources over closed information systems. They can be powerful sales tools for a new franchisor. Another newish development has been the lead generating company. Like brokers, they also can be sprawling networks of franchisee advisors. I always caution new franchisors to exercise care when dealing with any broker or lead generator, as the share of initial franchise fees they command can run north of 60 percent. The expenses involved, if not carefully managed, can pull the financial rug out from under a new franchisor.
Recruiting new franchisees truly is an art. The companies that have been successful tell us that they have tried everything, they have measured the responses received, and they have honed their activities to get the best bang for the recruiting effort.
Andrew Caffey is one of the nation’s leading franchise legal specialists; he represents franchisors across the United States. Caffey served as General Counsel of the International Franchise Association, a member of the Governing Committee of the ABA Forum on Franchising, and Chair of the ABA Forum on Franchising. He also is a member of the bar in Maryland and the District of Columbia, and a member of the Panel of Neutrals of the American Arbitration Association. Caffey is a frequent speaker and author on subjects of franchise and business opportunity regulation.