Many franchisors are very competent franchise salespeople, especially with franchise sales training, but don’t necessarily have the time to run the business and chase leads. We encourage you to take an honest assessment and ask, “Am I the one who should be selling this franchise?” If you are not up to the job, or don’t have the time, an outside sales company is necessary. Just because you can, doesn’t always mean that you should. Doing a cost versus time analysis will often help with that decision.
The outside sales company can be a combination of broker networks and your internal salespeople. Typically, they charge a flat monthly fee and/or a success fee for every deal that closes. Some companies will charge a percentage of royalties on all new franchisees. We do not recommend that you share royalties. The salesperson’s job is done when the sale is completed. They are not performing any of the support that generates the revenues. Think of it this way, if the franchisee were to close or file a claim against you, would they be sharing in that loss? If not, they should not be sharing in the revenues.
DIFFERENTIAL BROKERS TO CONSULTING COMPANIES
Broker networks do not exist to sell franchises. Broker networks exist to matchmake. Their job is to align appropriate candidates for your brand with your franchise sales team. Brokers talk at length with prospective franchise buyers to help them find a franchise concept that best suits them. A broker lead has a higher closing rate than other types of leads because there has been much prep work done ahead of time, including initial query forms, financial qualification processes, and criminal background checks. However, most broker networks don’t work with emerging franchisors. They look for systems with 10 or more locations open and operating. While some may offer programs for emerging franchisors, they can be costly and not yield results for 6 – 12 months. We recommend you do a full analysis prior to entering into any agreements.
We recommend you only work with reputable companies. There are some established networks that will add emerging brands to their catalog, contact your Client Relations team member for more information. The cost per lead will be high, averaging between 40-60% of the franchise fee, so it’s wise to weigh the pros and cons of working with franchise brokers. As mentioned before, we recommend taking a step back to evaluate your time and effort needed to perform the sales yourself, in-house, or with a hired sales force. Take the time to research your options, a network that works for your friend’s franchise concept might not work as well for yours. All the options mentioned have their own set of pros and cons, call them all, do your research and don’t rush to options just to get started; many franchisors wait to have a few franchisees before joining or working with others.
At Spadea Lignana, we have relationships with many brokers, consultants, and sales companies, and we encourage you to reach out to the Client Relations team, who will be happy to personally introduce you to some of these options. We love to make these matches, and we will follow up with you to ensure you’re going to be successful!