How to Sell Franchises

Speaker:Tony Fitzpatrick

 Managing Partner

www.franchiseyourbusiness.ie

Initial franchise fee

This is a once-off buy in payment and it is important to price it right.

Too low and the prospect worries about value. Too high and he can’t afford it.

Don’t expect to make a huge profit on the franchise fee. But don’t make a loss either.

Initial franchise fee

The fee should cover the cost of enfranchising that person.

You are not in franchising to make a quick kill. You are creating an income stream.

Think about value!

Brand name and the earnings potential.

The value of the brand depends on the size and reputation of the franchise network.

The more valuable the brand the higher the fee

Initial franchise fee

Make it reasonable for the earnings opportunity being offered.

You can always increase the price.

Dropping the franchise fee is to be avoided.

It might be perceived as being worth less than other brands.

If they pay less to buy in, they are less invested in their business.

You’ll be starting every franchise relationship at a loss.

Negative effect of a low Initial Fee

Other fees

Management fees can be a fixed monthly fee, or a percentage of revenue, or both.

You may also want to charge an additional monthly fee (usually 1% or 2%) of the franchisee’s revenue to put into an Advertising Fund.

The Ladder

People thinking of buying a franchise go

through several layers of interest. This chart

shows the level of progression:

4. Commitment

3. Active interest

2. Passive interest

1. Curiosity

The Ladder…

The chart is inverted because it is a ladder the

prospect must climb.

Don’t waste time with the curious! Move them

up the ladder—or move on yourself!

Move ‘em up or move ‘em out!

Move them from one level to another by asking questions.

Do they understand how franchising works? Have they ever run their own business

before? What interests them about this particular

franchise? What do they want to achieve?

And…

Can they afford to develop and sustain themselves in a new business?

Franchising is not for everyone

You are looking for entrepreneurs.

Energy, commitment and financial capability.

When they stop climbing the ladder it’s time to stop wasting your time

What should be in your prospectus

Your prospectus (Disclosure Document)

needs to explain what is included in your offering. For example:

Company history and track record Term of the agreement Investment required Obligations of both parties

What should be in your prospectus

Territory Use of Website Business Plan preparation Raising finance Training and ongoing support

Who are you looking for?

Every franchisor looks for “People People” with:

A business background Ability to work well with others Good organisational and leadership skills Determination and resilience Strong desire to achieve financial success

Good appearance and personal credibility Stable personal circumstances and support

of family Lots of energy and enthusiasm, and Can they sell?

In addition, these attributes are important:

How do you find them?

Your business has to be promoted. Don’t wait for prospects to find you! Promote it through:

Franchise section on your website Specialised “directory” web portals Newspapers and industry magazines Social media

The follow up

Leads are precious and cost money to generate. Don’t ignore them!

Prospects should be followed up within 48 hours. Delays can cause annoyance.

Leave the prospect too long and he’s either changed his mind or gone to the competition.

The process

1) Phone call

Do they measure up to the profile of your ideal franchisee?

Are they articulate? Do they sound enthusiastic? What is their business background? Why did they apply? Can they afford this franchise?

2) First meeting

Are they someone you could trust Would they represent your brand well? Sign confidentiality agreement before

divulging confidential information.

The process…

Choose carefully

Chose carefully as they can make or break your business.

Recruiting is all about relationship building. You are going to be working closely with them for the next five years at least.

Franchising is not easy and it’s not a career that suits everyone.

What the prospect expects from you

Transparency Leadership Sight of franchise agreement and Operations

Manual Meet the principals Financial projections Access to other franchisees Ongoing mentoring and support

Finally…

A franchise is not an impulse buy. It’s a

relationship-building process, and several

meetings are usually required before a

prospect will make a decision.

Remember the five cups of

coffee rule!