Selling More Franchises without Increasing the Development Budget

         

As a VP or Director of Franchise Development, how many options do you have to award more franchises without increasing the development marketing budget?

If anything, marketing and sales are under pressure to deliver more despite ever-tightening resources.

It’s no exaggeration to say that if franchisors can’t change the development math soon, many careers, livelihoods, and entire franchise systems will be in jeopardy.

What if there were a way to flip that math and sell more franchises at lower cost?

We know a way.

It involves text messaging and, yes, a bit of math.

Wait!

This math is super easy. And you’re really going to like what it shows. We promise.

But before introducing you to your future, we need to take stock of your present.

The Math of Franchise Sales Without Texting (i.e., Your Present)

         

Let’s start with a look at the cost of franchise sales for a brand that’s not utilizing 2-way text messaging for franchise development today.

(Sorry, your clunky CRM robo-texts -- if you’re using those -- don’t count. Prospects see right through them.)

Say it costs your franchise about $30 to generate a valid lead (whether from a lead generation portal, paying an SEO agency, freelancers for content marketing, or whatever).

And say that your sales team, after some effort, can eventually get ahold of a generous 1 out of 10 leads (10% contact rate).

Of the leads they’re able to contact, your sales team eventually awards a franchise to about 1 out of 35 (2.9% contact to close rate).

(Don’t get hung up on the specific numbers here. They’re examples to illustrate the math. Down below we give you a simple calculator to plug in your own brand’s numbers, if you like.)

So you manage to contact 1/10 leads and award a franchise to 1/35 of those contacted. This implies 350 leads for every franchise that your brand awards.

Bringing these figures together:

$30 cost per lead x 350 leads per closed deal = $10,500 cost to award a franchise.

Let’s see that in a table:

         

(Of course, if that deal is a multi-unit agreement, the cost to award a franchise is divided by the # of units in the agreement.)

So that’s the current state of play.

Sure, your lead costs, lead contact rate, and lead conversion numbers may be very different. You can substitute your own numbers later, if you like.

Regardless of where you are today, what’s key is how dramatically the numbers should move in your favor after you add effective, 2-way texting to the process.

Speaking of which, let’s do it...

The Math of Franchise Sales After Texting (Your Future)

         

You activate FranFunnel’s intelligent, 2-way texting software and watch your team’s lead contact rates jump overnight (we mean that literally) from, say, 10% to 25%.

(This is a conservative estimate: Lead contact rates of 25-45%+ are common for FranFunnel customers.)

Now, instead of reaching just 1 of 10 leads (10% contact rate), your team is getting ahold of 1 out of 4 (25%).

We hope your sales team is ready for all these conversations.

No, really.

Because things are about to change for you in a major way.

In fact, your sales team’s calendars may get so booked up with leads that they become a little complacent (ahem, we mean “more discerning”) about progressing candidates down the development pipeline.

We know you’d never actually let complacency take hold for long... but let’s pretend things slip a bit anyway.

So, instead of contacting 1/10 of leads and closing 1/35 (2.9%) of those they get ahold of, your team is successfully contacting 1/4 (the texting works!) and closing 1/45 (2.2%) because they’re so swamped with conversations.

Reaching 1/4 leads and closing 1/45 means it’ll take around 180 leads, on average, to award a franchise.

$30 cost per lead x 180 leads per closed deal = $5,400 cost to award a franchise (vs. $10,500 before your team was using texting).

Let’s see that in table form:

         

We assume above that your close rate on successfully contacted leads drops a bit (because you are suddenly speaking with way more leads).

In reality, the time your sales team once wasted not having their calls and emails answered can now be redirected to all those leads now responding eagerly over text.

As one FranFunnel customer remarked:

“FranFunnel automates 90% of the work for my sales team, and now they can focus their time closing deals.”

(Read more from that customer and other examples in the FranFunnel Case Studies library.)

Either way, you’re coming out way ahead.

But it gets even better.

In the example above, you went from spending $10,500 per franchise awarded to $5,400. That’s a $5k+ savings per franchise awarded.

If you were to award 1 franchise per month, that’s $60,000 in annual development cost savings. At 2 franchises per month, that’s $120,000 in costs saved. At 3 per month, it’s $180,000 saved. And so on.

All of a sudden, your development budget doesn’t have to be so constraining. You see that you’ve got options here.

But leaders don’t come into work everyday to inspire their team to play defense. Even in uncertain times, saving development money isn’t the goal that fires you up.

The goal is awarding more franchises, minting more entrepreneurs in your franchise system, and generating more revenue -- without spending more development dollars to do it.

You want to play offense. Drive growth. That’s what franchise development was created to do.

To quote Michael Bolton in The Lonely Island’s Jack Sparrow: “Now Back to the Good Part.”

(Potentially NSFW and, actually, please don’t go down a YouTube rabbit hole just yet -- we’re almost at the best part here.)

The Math Behind Selling More Franchises without Increasing Your Development Marketing Budget

         

What would selling 2x or 3x the franchises mean for your brand? Likely hundreds of thousands to millions of dollars of franchise fee revenue and market value added to the brand. Annually.

Do you think we’ve got a table for that, too?

We’ve got a table for that, too:

         

Again, your brand may be more or less expensive to sell.

The point isn’t any specific number above. The point is how your franchise development math can improve with effective texting and what that means for your increasing viability and value as a franchise brand.

Whether you’re paying for leads from a lead generation portal, paying a marketing agency to drive clicks directly to your website, or paying for SEO and content marketing to get your name out there and attract inbound interest, you’re already paying for leads.

You don’t improve your development math by starving your franchise for leads.

You flip the math entirely by extracting the absolute maximum from your leads, automatically, with texting technology.

Can you see why we’re so excited to share this? If you had this data, wouldn’t you be running around shaking people, like “Wake up! Wake up! You need to know about this!”

(Fortunately, FranFunnel customers like Smoothie King and Focus Brands do that for us already.)

Pumping Fuel into Your Supercharged FranDev Engine

         

Once you’ve got 2-way texting activated and your conversion process dialed in, you likely could trim your development marketing budget, because you’ve built such an efficient development engine.

But you really won’t want to.

​After all, if you have a franchise development machine that produces $10 for every $1 you put into it, how many dollars would you want to push into that machine?​

Exactly. All of them.

What would be the ROI of reinvesting just 15% of your extra franchise fee revenue into generating additional leads for your development team?

We’ll leave that math as an exercise for the reader.

Just kidding. We made you a table for that, too:

         

This stuff works. And fast.

But don’t take our word for it.

Read our case studies or reach out to FranFunnel’s customers. It’s why we’re so passionate about getting the word out to franchisors that we’re even willing to do a little math.

Welcome back to your future.

Get Your Own FranFunnel

Your FranFunnel could be live and texting leads in days. What are you waiting for? Schedule a demo today to see it in action.

And if you wanted to enter your own numbers into the tables we made, we’ve set up a Google Sheet for you to do that.

         

Leave a comment on this post on our LinkedIn, and we'll hook you up with a copy of this calculator!

Kayvon Bina is the Co-Founder of Metric Collective, the parent company of FranFunnel. He loves crunching numbers and loathes eating wraps.

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