Bailing Out Franchise Sales in Today's Economy

No matter what the economic environment, franchisors still must sell franchises if they are to grow and thrive. To do that, the majority of franchisees must be able to borrow. But with credit and lending frozen, nobody can borrow. So what's a franchisor to do?

That's exactly what Tom Wood asked about 40 franchise owners and sales executives in Chicago recently at the Franchise Leadership & Development Conference (hosted by Franchise Update Media Group). Wood, president and CEO of Floor Coverings International led the "mindshare" session, held in late September. Wood, a veteran sales professional, asked attendees to answer the following question as they entered the last quarter of 2008:

"As a group, what are one or two things you can do right now to drive more results in the 12 weeks?"

Here's what they had to say:

1) Work with lenders

1. This includes lining up financing in advance--and staying in touch with lenders as their requirements change. As the economic environment shifts like sand under their feet, bankers may cut back on lending to a specific industry segment (QSR, for example), or to a specific brand if its sales decline. Just because you had an agreement with a banker or lender in September doesn't mean it will be there when a franchisee shows up for a loan in October, November, or December--whether to open their first unit or to add a second, third, or fourth unit.
2. Prepare lender packages franchisees can take to the bank. Bankers like certainty and security. Equipping franchisees with a solid report on your concept's finances makes it easier for lenders to say yes--and provides your franchisee with added confidence throughout the borrowing/lending process.

2) Target customers

Targeting customers as prospects is preaching to the choir. They already like your product or service. Although being a great customer usually doesn't translate into becoming a great operator, the chances of finding enthusiastic candidates are greater than from the plethora of leads delivered by your own website, portals, and other online sources.

3) Poll top franchisees

Profile your best-performing franchisees and see if they are interested in opening additional units. They've already proven themselves, so they know the system, deliver the goods, and may be ready to expand. Work with them not only on financing, but on training them to be multi-unit or multi-brand owners.

4) Push referrals

If your top producers are not ready to add units, they often are an excellent source of referrals. They're your eyes in the field and can help you size up which customers might have the right stuff to become a good franchisee (as long as they don't open up close enough to cut into their market share).

5) Straight talk

Sales people are natural optimists. In these tough times candidates want to hear the truth. Don't paint an unrealistically rosy picture--it's tough out there. Even "recession proof" services such as hair salons are seeing a decline as customers wait longer between cuts and colorings.

6) Attend career fairs

Quaint as these may sound, local career fairs are becoming a source of leads and deals as a growing portion of the gainfully employed are feeling uneasy about their future. And as layoffs and unemployment continue to mount, a growing number of serious, skilled professionals are looking for a new career, or at least a "Plan B."

7) Get back to basics

Many franchisors are taking this time to review their sales process from top to bottom. They're looking to find where it needs improvement, and they're mystery shopping their sales team to see if the process is being followed. Franchise Update's own mystery shopping (posing as a qualified buyer and phoning in and emailing to the 148 franchise companies at this year's conference, who represented 57,000 units) revealed such fundamental flaws as:

• no callback within 48 hours (58%);
• not taking a name (24%);
• not taking a phone number (45%) or email address (40%); and
• not asking for a time frame for buying/opening a franchise (67%).

Scary stuff in tight times, when leads are down and each sale takes on additional importance to system-wide growth. (For more on lead generation, check out Franchise Update Media Group's Annual Franchise Development Report, www.franchiseupdate.com/afdr.)

Yes, times are tough and money is tight. It's not the economy stupid, it's the stupid economy. So get smart. Focusing on fundamentals, recruiting leads from every possible source, and keeping current with your lenders can help mitigate the pain.

Back to the Simple Basics Posted By: Anthony Donnelly on December 05, 2008 at 11:12:47 AM Rating: Great article, btw. Eddy. Hard economic times are actually potential blessings in disguise as it gets us off our complacent "you-know-whats". Just like new growth comes from terrible forest fires, recessions and depressions have a way of whittling out the weaker entities and making way for stronger, more profitable ones to grow. Likewise adversity is opportunity for some. We're actually rather fortunate in these tough times, since Merchants Barter Exchange and their newly invented MBE-barter system is thriving and expanding in leaps and bounds due to the cash-strapped situation many find themselves in right now. People need to go back to basics concerning how they sell, how they do business, and good old customer service and "loving people up" more. We hope that this downturn will actually stimulate a more community working together attitude. Again, great piece, lots of good, solid information. Anthony Donnelly Director of Licensing Merchants Barter Exchange (862) 324-2593