Franchise Development is a Business within a Business

Something you will see all too often in the franchising world is a brand with an outstanding business model, who for some reason is unable to find success with their recruiting. Over 80% of franchise brands have fewer than one hundred units after ten years, and over half of those are under fifty.

A good business model doesn’t directly correlate to recruiting success, because recruiting is a different business.

The skillsets of the the franchise development team is entirely separate. It’s a business within a business. They need to have their own strategies and tactics.

Franchise development should be operating off of an entirely separate budget and business model, where the only metric of success is hitting goals.They should have a separate business plan, as well as separate lead generation. In some situations, a separate website, separate SEO, and separate PPC. It doesn’t mean that there isn’t some spillover and some benefit from what’s happening on the operations side, but franchise development needs to be separate.

Every franchisor will tell you that they would love to be cashflow positive with their recruitment. What a majority of them don’t realize is that being cashflow positive is irrelevant if you’re not hitting your recruitment goals.

If a franchisor is breaking even or even making a little bit of money on the recruitment side, but not hitting your recruitment goals; They are not making any money. It doesn’t count, because the nature of a franchise business is to have successful units out there generating royalty income and creating that ongoing, sustainable, recurring revenue. It’s successful franchisees that make that happen. It is recruiting the right people, training them properly, supporting them properly. When that is not happening, the ultimate expense is being paid by not building and creating increased shareholder value, ownership in the franchise system, and in the model.

Most franchisors don’t know their true costs, not just the lead generation costs, but their total investment per signing.  They are unaware of the lifetime value of a franchise agreement, the royalties that are generated, and how that plays back into a return on investment – a return on recruitment investment.

To accomplish the goals you want to accomplish, your franchise development team is going to need to be at a more advanced level. Only 1-3% of franchise brands are operating at some level of the Advanced or Master level with regard to recruiting new franchisees and taking them through a recruitment or discovery process, getting the signings that they need, quarterly and annually, to accomplish their goals.

Reach out to a CGI team member to start identifying which financial metrics and ratios you should be focusing on in your recruitment model.