Auditing the Health of Your Franchise Organization Paradigms and Processes
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Five years in a row voted the #1 Franchise Consulting Firm in North America in an independent survey of over 900+franchisors More hands-on experience than any other firm ◦ ◦
Consultants with over 900 years of franchise experience 98 out of the top 200 franchise companies
More “senior level” experience ◦ ◦
Hands-on experience at start-up and established franchisors Former CEOs, CFOs, EVPs of more than 65+ different franchise companies
The ability to bring more resources ◦ ◦
Adia (now Adecco), Armstrong Tile, Auntie Anne’s, Dunkin Donuts, LINE-X, Pearle Vision, McDonald’s, PIP Printing, Schlotzsky’s, Snap-on Tools, Snelling & Snelling, and other national brands
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Strategic planning Quality control Marketing Organizational development
Franchise experience in 50+ countries
Numerous other awards and publications
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iFranchise Group Success Cycle Concept & Value Proposition Offer/Structure
Validation
Sales Communication
Marketing Plan
Ongoing and Field Support Message & Materials Opening Assistance
Support & Quality Control © 2023 iFranchise Group. All Rights Reserved.
Advertising Expenditures Documentation & Training Selectivity
Sales Process 3
iFranchise Group Success Cycle Concept & Value Proposition Offer/Structure
Validation
Sales Communication
Ongoing and Field Support
Marketing Plan
Holistic Process
Message & Materials
Opening Assistance
Support & Quality Control © 2023 iFranchise Group. All Rights Reserved.
Advertising Expenditures Documentation & Training Selectivity
Sales Process 4
Can test the waters in a variety of ways:
Mystery shopping a sample Branded phone surveys Branded electronic surveys
Be prepared to listen to their responses And be prepared to act accordingly Consider the development of a Franchise Advisory Council Validation Helps Franchisees (buying power, larger system, etc.)
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Auditing Core Strategy Concept & Value Proposition Offer/Structure
Validation
Sales Communication
• Starts with the concept • Must have strong value proposition • Must understand competition
Marketing Plan
• Sustainable competitive advantage Ongoing and Field Support
• ROI commensurate with Risk • “Me Too” is not a Strategy Message & Materials
Opening Assistance
Support & Quality Control © 2023 iFranchise Group. All Rights Reserved.
Advertising Expenditures Documentation & Training
Selectivity
Sales Process 6
Auditing Marketing and Sales Concept & Value Proposition Offer/Structure
Validation
Sales Communication
Ongoing and Field Support
Marketing Plan
Four core areas of marketing and sales can easily be confused, and people often jump to conclusions.
Message & Materials
Opening Assistance
Support & Quality Control © 2023 iFranchise Group. All Rights Reserved.
Advertising Expenditures Documentation & Training
Selectivity
Sales Process
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When making decisions about correcting a sales and marketing problem, you will be getting imperfect information. For Example:
Competitors are selling faster than you are Your close rate is “low” Is it really “low”
◦ Based on your industry? ◦ Based on the size of your investment? ◦ Based on your brand prominence?
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Your franchise salesperson says that the leads are not very good Your franchise marketing person says that the salesperson cannot close
Easy to jump to the wrong conclusion and make a decision that will not solve the error
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Understanding the statistics will provide you with an understanding of what might be broken. But you need to have a statistical sample to start. For Example:
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Situation one: in analyzing your KPIs, you find that one salesperson has a very low percentage of people coming in for face-to-face meetings but has a very high close rate of those that come in to meet. Potential problem: trying to sell the franchise over the phone instead of selling “Discovery Day” Situation two: in analyzing KPIs, you find that one salesperson seems to have a high drop off rate between the first and second call. Potential problems: failure to set an agenda, failure to explain the process, failure to establish specific dates and tasks.
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Diagnosing Sales Problems
Publicity
Brokers
Trade Shows
Direct Mail
Internet
High leadIndicate costs Could Lead could indicate Concept Problems media selection problems Low conversions could Face-to-Face/Discovery Dayof In indicate short, close analysis Could indicate Poorvarious marketing materials media-specific, Salesmarketing, problems and sales statistics, -Urgency can be indicative of where Agenda Low conversions Few leads -Setting problems exist, allowing couldmay indicate Close could indicate -Closing Skills for appropriate corrective poorofsales skills or action. lack broker poor validation confidence
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Referral
12 - 14 weeks
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Marketing and Sales Audit Process Sales Factor
Potential Problems
Symptoms
Diagnosis
• • • • • •
High unit investment Financial performance Look and feel Franchise structure Value proposition Franchisee validation
• • • • •
Bad/No P.R. Low unsolicited inquiries Losing sales to competitors Repeat objections not overcome Prospects go dark after validation
• • • • • • • • •
Evaluate design/construction model Comparative financial analysis Evaluate unit economics/ops Contract comparison Marketing comparison Phone interviews of franchisees Franchisee satisfaction surveys (web) Evaluate real estate portfolio Survey “lost” sales
Franchise Lead Generation
• • • • • •
Media Selection Media Mix Message Ad Spend Target Audience Timing
• • • • •
High lead costs Low close rates Message confusion Few qualified prospects Low quality lead sources predominate
• • • • •
Historical vs. norms Media specific analysis Performance vs. competitors Message vs. competitors Franchisee or competitor surveys
Franchise Marketing Materials
• • • • • •
Target Audience Materials Used Message Inadequate differentiation Design Quality Production Quality
• • • • • •
Bad/No P.R. Low unsolicited inquiries Losing sales to competitors Repeat objections not overcome Lose sales to market leader Low application rate
• • •
Review for best practices Message based on surveys Application rate vs. norms
• • • • • • •
Lead handling Follow up Effective Process Sales Skills Salesperson Motivation Sales Tools Staffing v. Goals
• • • • • • •
Low application rate Low discovery day rate Low close rate Long “time to close” Variances in salesperson close rates Un- or under-worked leads Few broker leads
• • • • • • • •
Historical vs. norms (close, speed, etc.) Salesperson vs. salesperson Historical vs. past performance Develop sales process map Mystery shop sales force Leads per salesman Sales per salesman Broker validation calls
Franchise Concept Itself
Sales Process & Technique
Problem Resolution – Phase Two Sales Factor
Franchise Concept Itself
Franchise Lead Generation
Franchise Marketing Materials
Sales Process & Technique
Confirmed Problem • • • • • • •
Unit investment Financial performance Look and feel Franchise structure Value proposition Franchisee validation Real estate model
Potential Solutions • • • • • • • •
Value engineer design and construction process Suspend sales and work on business model, support, franchisee training Retain design firm, consumer marketing firm, or PR firm as appropriate Revise franchise business structure Provide incremental value or reposition concept Communications plan, FAC, address survey-specific concerns Improve real estate process Develop third-party financing programs
• Alter of marketing to focus on higher-quality lead that sources The vast majority themixtime, we find • Alter message based on survey results • Increase advertising expenditure based on goals it is not just one thing that is broken. • Optimize website and PPC campaigns • Develop and measure benchmarks; rotate bottom 10% quarterly Instead, it is a combination of multiple things that can be improved incrementally • Target Audience • Rewrite, redesign, and reprint materials as appropriate • Materials Used • Develop or revise standard sales correspondence that will lead to improved close rates. • Message • Rewrite and redesign web pages as appropriate • • • • • •
Media Selection Media Mix Message Ad Spend Target Audience Timing
•
Develop formal marketing plan based on survey results
• • •
Inadequate differentiation Design Quality Production Quality
• •
Add technology improvements (auto-responders, sales software, etc.) Develop additional promotional tools (video, etc.)
• • • • • • •
Lead handling Follow up Effective Process Sales Skills Salesperson motivation Sales Tools Staffing v. Goals
• • • • • • • •
Develop and map effective sales process Train sales staff and provide guidelines to non-sales staff Replace poor sales personnel Benchmark and measure performance Alter compensation Evaluate external resource opportunities (FSO, LQS, software solutions) Add sales professionals, support staff, or both Proactive broker programs
Different franchises systems require us to target different types of franchisees – affecting the media and message used for effective marketing. For Example:
Identify your prospect as narrowly as possible ◦
◦
Survey Competitors:
Background
Hot Buttons
Media
Survey Top Franchisees
◦
Survey Lost Opportunities
Blind surveys of competitors
Using Social Media to identify franchisee backgrounds
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Characteristics of top performers
Doing surveys of where your competitors are advertising and where they are not
Analyzing competitive messaging
Repurpose bottom 10%-20% of marketing spend on a regular basis
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As we monitor KPIs, we must bear in mind that our historical viewpoint is being distorted by time.
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The average franchise sale takes 14 weeks to complete. If we advertise in a media that has a relatively stable audience, we might saturate that audience in three or four months. So, in month 6 through 10, we might see good franchise sales numbers and be inclined to continue using that publication. We may have extracted most or all of the gold that was to be had in that particular mine. Our human nature may tell us to continue to use that particular media if it has been productive in the past – especially if we are comparing it to a media that we have been in for only three months without any results. So, measuring the right KPIs (cost-per-lead) may be more important. Whereas KPIs like cost-per-sale may give us a measure of quality, we need to consider whether a media is giving us diminishing returns.
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Franchise marketing is very different from consumer marketing
Are you “me-too” marketing?
Are you making “The Five Sales” ◦ ◦ ◦ ◦ ◦
Go into business for yourself Buy a franchise Invest in your industry Invest in your specific franchise The timing is right
Have you developed your materials professionally – again, compare them to your competitors Be sure to have your attorney review all materials -- highly regulated
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Source of Franchise Leads by Media Percentage of Total Leads Received: 2011-2021
80% 70% 60% 50% 40% 30% 20% 10% 0%
Internet/ Your Print Digital Franchise Opportunity Website 2011
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2012
Referrals
2013
Trade Shows
2014
2015
P.R.
Email Mktg.
2016
Source: Franchise Update
Direct Mail
2017
TV/Radio Brokers Unknown
2018
2019
2020
Other
2021
Breakdown of Expenditures on the Internet/Digital 2016-2022
70%
60%
50%
Many of these leads are being generated from sources that are the least effective.
40%
30%
20%
10%
0%
Franchise Opportunity Sites
Other Business Media
PPC
SEO
2016
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2017
Email Marketing
2018
2019
Social Remarketing/ Networking Target Trailing
2020
Source: Franchise Update
2021
Social Media Advertising
Digital Asset Creative
Sponsored Content/ Native Advertising
2022
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Be sure to have your online marketing presence reviewed on a regular basis by experienced professionals! ◦ Website Performance ◦ SEO Keyword Rankings ◦ Social Media Presence ◦ LinkedIn Profile ◦ PPC Advertising Campaign ◦ Online Reputation
Prioritize your efforts based on results and budget knowing that the internet will likely be responsible for 70% of your initial leads and that 99%+ of your serious leads will have looked at it – probably in some detail.
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Auditing the Sales Process Concept & Value Proposition Offer/Structure
Validation
Sales Communication
Marketing Plan
Ongoing and Field Support The franchise sales process is unique and highly regulated. Opening Assistance
Quality Control
If you can improve your close rate , avoid a bad franchisee, or reduce the threat of litigation, this process is well worth the effort
Advertising Expenditures
Documentation & Training Selectivity
© 2023 iFranchise Group. All Rights Reserved.
Message & Materials
Sales Process 20
Unique process unlike any sale ◦ Quit your job ◦ No more benefits, paid vacations, 401ks ◦ Put your trust in someone you have never before met ◦ To invest your life’s savings ◦ In a business in which you have no experience ◦ And to which they are making a “lifetime” commitment
And, oh, by the way, I can’t tell you how much you may make
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Sales Process Mapping Looking for “Leakage”
Lead Received and Qualified
Full or Mini Brochure Sent to Candidate
Completed CIRF Received
Review of Candidate’s CIRF
Add one unnecessary hoop to jump through = leakage
Personal Interview Scheduled
Credit/Criminal Checks Completed
Personal Interview and DISCLOSURE of FDD
Reference Checks
Discovery Day Follow-up Discussion with Candidate
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Decision is Made on Candidate’s Approval
PRELIMINARY Approval is Granted
Franchise or Site Selection Agreement is Signed
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More important now that Questionnaires and Disclaimers are going away Work with lawyers to preserve confidentiality Broad range of skills
Initial phone technique (timeliness, accuracy, qualification, data capture, documentation Sales skills (establishing rapport, defining goals, value proposition, etc.) Follow-up promptness, technique, and persistence Understanding and use of franchise sales best practices Representations consistent with the FDD and in compliance with franchise laws Setting the agenda and specific sales goals Knowledge of the franchise offer and competition Proper positioning vs. competitors Advances vs. continuations Ability to ask for commitment Ability to answer “standard” questions Selling Discovery Day vs. franchise. Ability to close
Documentation adequacy KPIs consistently tracked and measured
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Discovery & Competitive Benchmarking
Primary Research on Franchisee Validation
Research on Lost Prospects (and/or comparables)
Sponsored Franchisee Survey (option)
Mystery Shop Franchisor’s Sales Force
On-Site Interviews and Planning Session
Franchise Sales Process Mapping
Qualitative Analysis of Franchise Messaging
Qualitative Analysis of Marketing Tools
Statistical Analysis of Sales Results vs. Norms
Recommended Changes to Current Practice
Franchise Marketing Plan or Sales Training (options if needed)
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Auditing Core Strategy Concept & Value Proposition Offer/Structure
Validation
Sales Communication
Marketing Plan • Tools • Goal Driven Planning
Ongoing and Field Support
• GAP Analysis • Organizational Growth Plans • Financial Analysis
Message & Materials
Opening Assistance
Support & Quality Control © 2023 iFranchise Group. All Rights Reserved.
Advertising Expenditures Documentation & Training Selectivity
Sales Process 25
Role as a sales tool
Role as a training tool
Role as a reference tool
Role as in reducing liability
Extension of the legal documents
Have your manual professionally reviewed at least once per year and put someone in charge of manual updates and revisions.
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A good Operations Manual can help you avoid litigation A bad Operations Manual can be a franchisor’s worst nightmare Operations Manuals must provide you with adequate brand control but should not be too prescriptive – a fine line Brand Standards Best Practices -- Recommendations
Must avoid creating an inadvertent “agency” relationship or joint employment relationships Must avoid potential areas of negligence or take great care when prescribing actions – especially in areas such as HR
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I told you not to panic! Everything will be just fine.
"Some people seem to think there's no trouble just because it hasn’t happened yet. If you jump out the window at the 42nd floor and you’re still doing fine as you pass the 27th floor, that doesn’t mean you don’t have a serious problem." – Charles Munger, Vice Chairman, Berkshire Hathaway – 28
Discussions with Key Stakeholders
Review existing material, forms, & documentation
Develop preliminary outline
Determine gaps in current documentation
Assign responsibility for content creation
Identify Subject Matter Experts for gaps
Interview Subject Matter Experts
Onsite observation of units & documentation
Resolve Best Practices Conflicts
Draft material to cover all identified gaps
Edit all material into common style & “voice”
Revise first draft of Operations Manual based on client & legal input
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Faster growth requires formal training programs
◦ For your staff ◦ For franchisees
Focus on training the trainer (your franchisee)
◦ Franchisee will train their staff – avoid joint employer issues ◦ Should have tools to do so
Video pushes QC to lowest level of organization On-line training decreases costs, increases
quality, and can decrease liability
◦ Customized by employee ◦ Document what is reviewed and test scores ◦ Lowers on-site training time and costs for both the franchisor and the franchisee
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Establish long-term goals first Do NOT try to establish value from growth Goals drive your business. Start with support and cost structure. What do you need to do to help your franchisees succeed? Reverse engineer your success. Annual planning process not just for franchisees but for you as well GAP Analysis to Determine organizational needs
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Goal
Sell for $20M in 5 Years
Average Selling
15 times EBIT
Year Five Earnings
$20M/15 or about $1.3M
Average Royalties
$30,000 per franchise
Average Net Royalties
$10,000 per franchise
Need to sell
$1.3M/$10,000 = 130 Franchises
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Sales
50
30 25 10 Year © 2023 iFranchise Group. All Rights Reserved.
1
15
2
3
4
5 34
Hire Franchise Salespeople 50
Sales
30 25 10 Year © 2023 iFranchise Group. All Rights Reserved.
1
15
2
3
4
5 35
Hire Field Reps
Sales
50
30 25 10 Year © 2023 iFranchise Group. All Rights Reserved.
1
15
2
3
4
5 36
Hire Support Staff
Sales
50
30 25 10 Year © 2023 iFranchise Group. All Rights Reserved.
1
15
2
3
4
5 37
Sales
50
Personnel Marketing Office Space Brochures
10 Year © 2023 iFranchise Group. All Rights Reserved.
1
30
25
15
2
3
4
5 38
Onboarding and Support Concept & Value Proposition Offer/Structure
Validation
Sales Communication
Ongoing and Field Support
Opening Assistance
Support & Quality Control © 2023 iFranchise Group. All Rights Reserved.
The faster your franchisee opens their doors for business and the faster they achieve profitability, the more likely it is that they will succeed and the more likely it is that they will validate well. At the same time, a faster and more effective opening will reduce your costs and allow you to bring on more franchisees faster.
Marketing Plan
Message & Materials
Advertising Expenditures Documentation & Training Selectivity
Sales Process 39
Designing a streamlined process for site review and acceptance, permitting and licensing The design and build-out process (hiring an architect, contractors, etc.) Required equipment, POS, pre-opening supplies, establishing vendor relationships, etc. Hiring and training initial staff Competitive survey and pricing Grand Opening promotion procedures, using a “soft opening, role of your opening team Force-feeding sales early Your role and the role of the Grand Opening Team Week-by-week activity countdown checklist Insurance administration and compliance systems Establishing and maintaining file systems, tracking ongoing communications Details of the field consulting role and processes for conducting site visits Specific checklists and scoring Assisting franchisees while not on-site/communication plan Benchmarking Key Performance Measures Franchisee reporting, accounting, and auditing – Use of Third Parties in Year One Sharing of best practices within your system Ongoing measurement of franchisee satisfaction
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The Audit Process Assessment Goals/Mission Defined Human Resources Strategic Audit
Franchise Structure Value Proposition Adequacy Competitive Positioning
Franchisee Survey Validation & Communication Audit
Refinement Develop staffing plan, organizational map, and growth plan Determine desired relationship changes Financial Projections based on changes Develop Implementation Plan
FAC Utilization Potential problems?
Message Refined Franchisee Profile Honed Collateral Material Strong Sales Process Adequacy Tracking in place Training Assessment HQ Support Assessment Quality Control & Onboarding Audit
Recruit additional staff if necessary
Communications Tracking Develop Value Proposition and U.S.P.
Communication Vehicles
Marketing and Sales Audit
Implementation
Personnel Adequacy Monitoring adequacy Systems documentation
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Develop communication vehicles & implement plan Revise training and document as necessary Develop and document systems as necessary Revise Operations Manuals as necessary Train internal staff as necessary Develop Monitoring Procedures and Tools
Recommended Changes to Program
Revise Agreement and FDD Submit and Finalize State Registrations
Introduce New Franchise Structure
Develop marketing materials as necessary
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www.ifranchisegroup.com 708-957-2300
If you would like a copy of this presentation or a complimentary book, please provide me with your business card. If you are seriously considering a rewrite of your operations manual, we are happy to do a review of that document as well.