Stop Selling and Start Recruiting

When discussing franchise development best practices at events such as the recent Franchise Update Leadership & Development Conference and IFA Conference, you hear franchise professionals throw around terms such as “franchise sales,” “franchise development,” and “franchisee recruitment.” If you were to examine their core philosophy on how to best expand a franchise network, you would find professionals seem to fall into two separate and distinct camps: Recruitment and Sales. Both parties maintain their philosophies are superior to the other. Sales seems to be the dominant philosophy of the moment.

In this blog we distinguish the differences between these philosophies, and see which philosophy produces the best results and is most consistent with the long-term, best interest of franchisors and franchisees.

Recruitment Philosophy

• Franchisor selects only those candidates who both match the franchisor’s profile of successful franchisees and whose objectives can be met with a high degree of probability using the franchisor’s business model.
• Franchisor focuses on whether or not candidates are a match for both the business and corporate culture.
• Franchisor focuses on recruiting quality franchisees.
• Franchisor seeks to eliminate potential failures by either denying marginal candidates a franchise or having a plan to mitigate both candidates’ and franchisor’s risk.

Sales Philosophy

• Franchisor sells franchises to all candidates who demonstrate a willingness and financial ability to purchase one.
• Franchisor focuses on whether or not the candidates will buy the franchise.
• Franchisor focuses on recruiting a quantity of franchisees.
  Franchisor seeks to maximize growth by accepting marginal candidates and turning a blind eye to additional risk.

Which philosophy makes the most business sense?

To answer this, you have to believe that being a franchisor is a business unto itself. In the business of franchising, franchisors typically generate revenue in either two or more of the following ways:

• Franchise fees
• Royalties (continuing fees)
• Product purchases
• Ancillary fees (technology fees, marketing fees, transfer fees, etc.)

When asked “Which of these revenue streams are most important?” most franchisors would indicate “royalties” or (with some franchisors) “product purchases.” In other words, franchisors are in it for the recurring revenue streams, however these streams are generated.

Therefore franchisors are ultimately all in the same business: recurring revenue collections.

Now think about which franchisees make the greatest recurring revenue contributions. Aren’t these the most successful franchisees?

Then think about which franchisees consume the greatest amount of the franchisor’s time, money, and energy. Aren’t these the least successful franchisees?

Last, think about which franchisees subsidize the time, money, and energy franchisors spend with the least successful franchisees. Again, aren’t these the most successful franchisees?

Successful franchisees pay the most, consume the least, and validate the concept the best to franchise candidates. They are both the franchisor’s high-margin repeat customer base and ambassadors for the brand.

Conversely, unsuccessful franchisees pay in the least, consume the most, and validate the worst. They offer the franchisor a low margin at best, or if the franchisor costs it out they may actually be losing money. Not all recurring revenue dollars have the same margin. Not all franchisees are ambassadors to the brand. Franchisors with a franchisee recruitment process are more likely to identify and screen out potential weaker performers than those managing a franchise sales process.

WINNER: RECRUITMENT