There are two different philosophies about the intent of the initial franchise fee.
1) The initial franchise fee is the franchisor “breakeven cost” of recruiting new franchisees into your system, and/or
2) when the royalty fees equal your monthly corporate overhead, the initial franchise fee is your net profit.
If you are in the infancy or early stage of franchising your business, operate less than 100 units and subscribe to either (1 or 2), you are at grave risk of making unprofitable decisions on what marketing sources and selling costs will be utilized to grow a profitable franchise system. These two philosophies should be managed as “mutually exclusive” during this critically important stage of your development. (FGP specializes in consulting and training early stage franchisors to protect this understanding.) Your future success as a franchisor hinges on you receiving this critical thinking before it is too late. Well-intended attorneys, consultants and franchise executives offer cursory operational insight on this subject without showing you the financial impact of how these entirely different philosophies impact your ability to be profitable in your launching stage. A healthy launch will make or break your future.
There are several “franchisee profile” companies, which offer personality tests as a predictive model of how well new franchisees will perform in the future when operating your business model. There are more scientific studies to prove a personality test can discover personality and behavioral dispositions, however with minimal influence on an individual’s decision making, overall attitude, dedication, work ethic, eagerness to engage in a long-term relationship and follow a business operating system. Additionally, an individual’s net worth and education do not correlate to how they will utilize their financial resources and working capital during their start-up phase and first full year in business.
It must also be factored that personality, life circumstances (family, health, marriage, personal interests), local and national economics, along with employee availability and customer response all play into the results of the franchisees’ high, medium and low business results. While measurable evaluative criteria is important, there are controllable and uncontrollable factors (seen and unforeseen), which influence the outcome of the business. Franchisees may possess all of the measurables of a great quarterback or franchisee, however, there is no guarantee of their success or failure. A high quality and thorough franchisee “interviewing and approval” process will help identify the intangible factors that will lead to success. Even then, there are still no guarantees.
Tom Brady, quarterback for the New England Patriots, has won two Super Bowls. Because of his weak (physical) measurables, he was overlooked in the draft until the 6th round. His coach, Bill Belichick, interviewed Tom and said, “This guy is a winner.”
Lesson: Your franchisee candidate may possess intangible entrepreneurial traits that are success-oriented, and must not be overlooked. These traits may not have been identified by a personality or profile test.
The franchise sales executive is your biggest corporate asset because they recruit the “quality” of franchisees, which are the backbone to your franchise system. There are 25 unique, personal and professional characteristics that must be interviewed before hiring this executive. Integrity, intelligence and energy will further define the difference between a performing and non-performing franchise sales executive. Your responsibility as founder/CEO is to recognize that regardless of his or her natural sales ability, there is a level of training and retraining necessary to provide the tools for success. Franchisee recruitment is unlike other sales professions and requires highly specialized consultative diagnostic reasoning, training and role-playing. If the founder/CEO has not been trained or certified in this specialized area of franchising, there is little to no ability to translate the “why’s and how’s” to achieve your franchisee growth and expansion plans. First, train yourself and you will be further qualified to hire, train and manage the operating results of your franchise sales department.
There are personal, regional, and demographic criteria that contribute to how an individual “purchases” a franchise or is “approved” for your franchise. Some candidates are cooperative, decisive, impulsive, egotistical and often afraid and skeptical. More importantly, FGP will train you on how to communicate with individuals ages, 20, 30, 40, 50, 60 plus, husband and wife teams, out-placed executives, partners, investors, existing entrepreneurs, immigrants, celebrities and athletes, when each candidate is experiencing their own unique life transition point and entering into a new world of self-employment. As a trusted advisor, this is a noble service and must be managed with a high degree of care and professionalism.
Live telephone inquiries, Internet portals, consultant referrals, tradeshows, corporate website and customer referrals represent the various types of franchise inquiries. Each inquiry is a human being with dreams and aspirations, like yours. Each individual should be treated as a customer, not a lead, regardless of their financial or educational pre-qualifications to own your franchise. Each customer deserves an equal opportunity to be considered as your franchise partner. You are courting individuals more than qualifying leads. Regardless of lead source, each customer inquiry should be processed in a fair and equal manner.
Live telephone inquiry - Represents 100% contact rate.
Internet portal inquiry - Represents 20-60% contact rate.
Consulting referral inquiry - Pre-qualified in most cases.
Tradeshow inquiry - Face-to-face introduction.
Corporate website inquiry - In-house inquiry.
Customer referral inquiry - Happy customer inquiry.
The fundamentals of building trust and awarding franchises to qualified candidates remains highly personal, consultative and relationship oriented. Contemporaries have utilized cell phones and technology as the “ be all end all”. These shortcuts and impersonal approaches are the root cause of declining contact rates, which contributes to unprofitable operating ratios. FGP will train you on live telephone calls, messaging and emails. We will encourage the use of professionally printed and electronic collateral material. There are certain demographic software, lead management and sales analytics tools to properly manage your candidate approval steps and improve your contact rates. There are varying degrees of etiquette and courtesy on when to contact candidates (hours) and how to respect the value of time. When your candidate is serviced professionally during this partnering process, they will be much more receptive to your field support representatives throughout the life of your working relationship.
Each franchise concept will operate within its own industry and you will compete with other fine-tuned franchise concepts. FGP will train you on how to develop each educational step within your franchise approval process, i.e. initial telephone calls (1,2,3), franchise application submission, concept, marketing, training and support. If you are an existing franchisor, we will evaluate in depth your partnering process and offer suggestions to re-engineer your franchise approval process. Additionally, you will learn how to conduct four types of Discovery Days (corporate, regional, group and personal), each with their own itinerary. Each candidate will encounter obstacles and challenges throughout this journey. Your process must encourage self-confidence and a support system of unified decision-making with partners, investors and spouses.
Each franchisee will require an in-depth financial analysis of their completed franchise application (unique composition of net worth). Their net worth has been pre-qualified to complete your discovery process. It is your responsibility to provide funding strategies and consult with your franchisee candidate on various methods of funding their business. FGP will function as your lending department to fully assist your candidate and sales department in providing a 1-hour comprehensive financial analysis and offer your franchisee candidate three funding strategies to allow them to proceed in joining your franchise family.
There are legal compliance steps, which require you to provide your candidates your Franchise Disclosure Document (FDD) signed and returned as a receipt of signature, before you can execute a franchise agreement or accept a payment of your initial franchise fee. You will be required to utilize a 14-day waiting period before you can enter into a final franchise agreement and accept payment of the initial franchise fee. A franchise candidate may only purchase a franchise once in the course of their lifetime, and for this reason a thorough explanation of each section of the Franchise Disclosure Document (FDD) will assist your candidate in understanding the purpose of each item within your franchise agreement. FGP will train you on how to conduct a review of this document, which strengthens mutual respect in the interest of both parties before entering into a long-term business arrangement.
If you are considering franchising your business, or you are operating less than 25, 50, 75, or 100 units, we encourage you to contact us to learn more about our training itinerary and to register yourself, founder/CEO and franchise sales executives in our 2-day Franchisee Recruitment and Sales Training Certification program. We offer a 100% satisfaction guarantee or we will refund your payment in full.
Franchise Sales Management: FGP will consult on the important decisions of recruiting your first franchise sales executive. These decisions include:
Our industry trains a franchise sales executive to sell more franchises to a higher qualified franchise prospect, “only” if they are on a salary and commission program. FACT: In 24 years, we have found that the type of compensation, salary or straight commission, has nothing to do with the number or quality of franchises a salesperson will sell in any given year. Once you are trained and certified as a franchise sales executive, you can either sell or can’t sell…regardless of your compensation. Confident sales people have proven it is just the opposite. Commission sales people sell more than salaried sales people.
(References Upon Request)
The average training program increases your staff’s productivity by 22% over the short-term, but 1-on-1 coaching increases productivity by more than 88% and sustains it.