Are you a new franchisor wondering what it takes to sell a franchise? How to respond to franchise inquiries? Watch this video and read on to find out:
- What it takes to sell a franchise
- How to respond to franchise inquiries
- How to develop a sales process that works
For startup franchisors, responding to franchise inquiries the right way is a critical part of scaling your business. It can mean the difference between closing a sale or losing one – especially when it comes to working with franchise brokers in the future.
But what does it take to grow a new franchise system from the ground up? What are the steps you need to take as a new franchisor to make your first sale and, eventually, take your brand to the next level? And how do you know if you’re doing it right?
Like most things in the franchise world, having a process that works is the key to success. In this article, we’ll share expert tips and explore best practices for responding to franchise inquiries as a startup franchisor – and get you on track to selling your first franchise.
Develop a Process
As a new franchisor, it can be easy to get stuck in a loop of believing you’re not ready to do the things you need to succeed – including reaching out to franchise brokers.
“As brokers, we're not afraid of emerging brands, but they need to have their process and their steps in line,” says Lisa Welko, a certified franchise executive and president of Integrity Franchise Group, a franchise consulting firm.
Before connecting with brokers, Welko advises new franchisors to make their first few franchise sales on their own – a strategy that can help you develop a polished, professional sales process based on real-world experiences that will take your sales interactions to the next level. Although your process doesn’t need to be sophisticated, it should follow a logical order and touch on key points that help a franchisee candidate easily see the value of your brand over others.
“The reason that you franchise your business is to sell franchises. Selling is critical, and selling to qualified candidates is even more critical. Without a thoughtful and evolving franchise sales process in place, you'll be losing out on opportunity – good-fit franchisees that don't choose your franchise because you're not engaging them properly, and bad-fit franchisees that you onboard because your processes are not thorough enough,” says Charles N. Internicola, a franchise attorney with over 25 years of experience and founder of The Internicola Law Firm.
Although it may seem intimidating to get started, it’s critical to put a process in place early on to communicate the right level of professionalism to prospective franchisees considering investing in your new business.
“[Franchisees] know, intuitively, that you're going to be new and you're going to slip a little bit. But if you show a deep bench and you're organized, that says you're going to take care of them – you're going to support them,” Welko says.
1. Schedule a preliminary discovery call
When developing a process for responding to franchise inquiries, make sure to guide prospective franchisees to a phone conversation. When responding to emails from interested potential franchisees, send a friendly message inviting them to join you for a call to learn more about them and help them learn more about your brand.
“It has to be … ‘Here's our process for helping you get to know about the brand,’ not, ‘Here's our process for how to buy a franchise,’ because they're gonna say bye. Nobody wants to buy a franchise. What they want to do is own a business, and you're the path to that,” Welko says.
2. Send basic marketing materials
Before your scheduled call, send the prospective franchisee your basic sales materials to educate them about the brand and opportunity you’re offering.
Internicola advises sending a link to a well-designed franchise sales website, which should contain, at minimum, a contact form, a call-to-action (usually directing the prospective franchisee to the contact form), a video (typically the founder story), and three unique differentiators that explain your “Why You, Why Now” – the advantages your brand offers compared to the competition, and why a prospective franchisee should choose your franchise over others at this moment.
In addition to your website and social media links, Welko says having a brochure – something tangible for the franchisee candidate to evaluate while considering the opportunity – is a smart idea.
“I think you have to have a short brochure, maybe three pages long, and then follow up with a longer brochure after that first conversation. Have information and an agenda, and some sort of process for walking [prospective franchisees] through your discovery. …” Welko says. “If they don't have something to look at, more often than not, that doesn't make the shortlist.”
In the brochure, make sure to include information about your differentiators, value proposition (a promise of the value to be delivered), and the target demographics of your ideal franchisee (who is a good fit for your brand, and who isn’t). You should also include your “Why You, Why Now.”
3. The initial discovery call
During your initial call, have a sincere conversation with the prospective franchisee. Go over the materials you sent them and ask questions about why they’re interested in your brand, how they discovered your franchise, why they want to own a business, and what they need to move forward.
To help franchisee candidates feel comfortable opening up to you about their interest in your brand, use friendly language and an authentic tone – but remember not to worry too much about your approach.
“Sincere franchisors that know they could transform lives do use phrases like ‘awarding franchises’ and things like as, as opposed to ‘selling,’ and maybe that could sound superficial. But for the sincere franchisors out there, it's genuine. And so the point is, you're gonna have a human conversation. If they’re not a great fit, you don't want to sell or bring them on as a franchise, right? You want to reward and build that relationship – and that has to be the mindset,” Internicola says.
While it’s a good idea to keep your initial interactions with prospective franchisees light and approachable, it’s also important to make sure they can afford to invest in a franchise before moving forward. Remember to discuss initial fees and other startup costs in a straightforward way, making sure the franchisee candidate understands why the investment is worth it.
“Have a candid conversation about estimated startup expenses, reserve capital requirements, and understanding the candidate’s financial expectations,” Internicola says.
Schedule a follow-up call
Throughout the entire sales process, it’s important to maintain ongoing communication with prospective franchisees. At the end of your initial phone call, make sure to schedule a follow up call to discuss the opportunity in more detail and answer any questions they have about the extra materials you’ll send them before your next conversation.
4. Disclose the Franchise Disclosure Document (FDD)
As mandated by the Federal Trade Commission’s Franchise Rule, franchisors are legally required to disclose their Franchise Disclosure Document to prospective franchisees no later than 14 days before offering or selling a franchise. Because of that, many franchisors choose to disclose the FDD after the first discovery call, though some choose to disclose it after the second call.
“It depends on the overall process and how extensive the first phone call is. Either can work, but what is most effective is the quality and structure of the first and second call,” Internicola says.
Know your numbers
As a broker, Welko says franchisors need to be familiar with their numbers so they’re able to answer questions from franchisee candidates about their financials after they’ve reviewed the FDD.
“Items 5, 6, and 7 need to be buttoned up, and you need to know your numbers. [The FDD] has to be tight, it has to be detailed. It can't have huge, massive gaps between the low end and the high end – and, if it does, you're going to have to highlight that or break it down a little bit more so you can explain,” Welko says, explaining that those FDD items are of particular importance to brokers and prospective franchisees when evaluating a franchise opportunity.
Under the Franchise Rule, Item 5 of the FDD contains the disclosure of initial fees, payments and commitments, and conditions on their refundability.
Item 6 of the FDD includes the disclosure of recurring or occasional fees associated with operating a franchised outlet, including royalties, advertising fees and transfer fees.
Per the Franchise Rule, Item 7 of the FDD requires the disclosure of a franchisee’s entire estimated initial investment. The purpose of this disclosure item is to give franchisees a more detailed description of their initial investment than other disclosures in the FDD.
Under the amended Franchise Rule, franchisors are permitted to disclose representations about financial performance in Item 19 of the FDD. While Item 19 disclosures are optional under specific circumstances, the majority of franchisors include Item 19 in their FDD disclosures.
Get a signed receipt page
Once the FDD has been delivered to a franchisee candidate, make sure to require them to sign a receipt page to confirm receipt of the document for your records. Then, step back and let them review it. Remember that the FDD is a legal document, so you shouldn’t review it with the candidate or provide legal advice. Instead, encourage prospective franchisees to consult with an experienced franchise attorney to review the FDD.
5. Send more detailed sales information
After you disclose the FDD, send franchisee candidates more detailed information about topics you’ll discuss in your next conversation. These materials might include an information packet, brochure, downloadable guide or other materials designed to educate serious franchisee candidates.
6. Use the second call for education and answers
During your second call with a prospective franchisee, make sure to have an itinerary and go over important points. Answer their questions about the brand, explain what sets your franchise apart from other opportunities, what advantages and support you provide to franchisees, what the basic contents of the FDD are, what the next steps are, and any other points that need to be addressed.
7. Schedule additional follow up calls and meetings as needed
At the end of your second call, remember to offer the franchisee candidate an opportunity to maintain communication with you as they continue to learn more about your brand on their own. Schedule additional follow-up calls as needed to answer questions and hear feedback about materials they’ve reviewed.
Look for Signals (and Warning Signs)
When dealing with franchisee candidates as a new franchisor, it’s important to learn to evaluate signals – and warning signs – to determine whether a prospective franchisee will be a good fit for your system.
“[Look for] expectations and alignment. Warning signs can be found by evaluating the candidate’s expectations about what it means to be a franchise owner, how your franchise can fit into their life goals, and understanding a candidate's financial capability. The biggest warning sign is a franchisee that is expecting too much financially in the performance of a franchised outlet,” Internicola says.
Prepare for Common Obstacles
As a new franchisor, you can never be too prepared when it comes to common challenges startup franchisors face early on. It's important to educate yourself continuously about the franchise industry and prepare yourself for roadblocks before they occur.
Focus on organic growth first
New franchisors should plan to develop a Five Year Success Plan early in their franchising journey, with the first year focused almost exclusively on organic growth and sales.
“What sells franchises are happy franchisees that perform well. As a startup franchisor, attracting your first group of franchisees is critical, and the most cost-effective way of doing that is focusing on individuals that already know your brand, your business model, and that may be interested in buying a franchise. Organic attraction is much more cost-effective than traditional franchise sales marketing,” Internicola says.
Establish your role in the process
As a new franchisor, it’s critical to take the lead when it comes to setting an agenda during conversations with franchisee candidates. This can help establish your role as the franchisor, but it also lets the candidate feel confident that you know what you’re doing as a leader.
“You don't want your franchisee ever necessarily dictating to you what the next step is. So establish that relationship right away – that you're the franchisor, or you're the parent in this relationship, and you're going to guide the process. Make sure they have a full understanding, that they're educated in what they're doing, and at the end, we're going to have success,” Welko says.
A common challenge for startup franchisees, early on, is identifying the right communication strategies to reach franchisee candidates in ways they can easily understand – especially if they’re new to the industry themselves.
“Communication must be open, honest, but also formal. As you build your franchise system, it's important to build out consistent and structured communications, including regular check-in calls and quarterly coaching,” Internicola says.
Provide the right amount of information
Although it’s important to avoid overwhelming prospective franchisees with too much information, especially when it comes to organic leads, candidates must learn something new about your brand during every interaction and conversation.
“As brokers, for us, [franchisee candidates] are saying, ‘Okay, they called me, they had a 45-minute call set up, and I didn't get any information.’ … You always have to have them leave having learned something, there was forward progress made, and you know what the next step is,” Welko says.
Lead from behind
As a new franchisor, it can be tempting to guide a franchisee candidate toward a sale assertively. In practice, however, it’s a better idea to respect the comfort of prospective franchisees by following their lead when setting a timeline during the sales process.
“It's not your timeline. It's their timeline. If they want to learn quickly, then move quickly. If there's someone that learns better with little bits and pieces along the way, you might have little bits and pieces calls along the way. Listen for the cues – how do they want to learn? If you're a brand new franchisor, you've got the time,” Welko says.
As your brand grows and matures, so should your franchise sales process. As a new franchisor, one of the most important things you can do is remain flexible and let your company evolve.
“Because a winning franchise system is always a work in progress. There should be continuous improvement of your brand, brand story and the value you offer to franchisees,” Internicola says.
Keep assets updated
As a new franchisor, your brand will naturally evolve as it grows. Because of that, it’s critical to keep your marketing assets updated to reflect your current position in your industry.
“What your materials and website are on day one, she looked very different six months in, and next year. And if you keep improving those assets, you're going to win eventually,” Internicola says.
Assess sticking points
As your sales process evolves, make time to assess its strengths and weaknesses to apply changes accordingly. This will help you streamline your interactions with future franchisee candidates.
“Where you're getting stuck – if that's the same spot, fix it. That's not on them,” Welko says, explaining that common sticking points in the franchise sales process should be identified and corrected by franchisors without shifting blame to franchisee candidates or brokers.
As a startup franchisor, it’s important to remember that franchising success doesn't happen overnight. It’s a long process that can take years to achieve. It requires a solid foundation, a strong vision and a lot of perseverance. For franchisors that are in it for the long haul, though, the personal growth and financial rewards can make the wait worth it.
“Let [franchisee candidates] learn at their pace. It could take a month, it could take two weeks. … Don't let them be dictators, but listen and then adjust, especially new franchisors. These are organic [leads]. They already like you. They've already raised their hand and they're willing to be first. So that's incredible. You're gonna learn a lot from them – don't forget that. They're going to teach you how to be a franchisor at their expense,” Welko says.