What is the best way to grow a franchise brand in 2024?
This is the question a sold out and record attendance of the 2023 IFA and Franchise Update Franchise Leadership and Development Conference in Atlanta struggled to understand.
Franchising is historically a down market business – one that does well in down market cycles as people look to business ownership to get more stability in their lives and have more control over their future.
According to the US state of the industry report, 84% of franchisors attending did not meet or will struggle to meet their 2023 franchise development goals. We are always a bullish and optimistic industry but when only 16% meet goals, it is a good time to take a step back and evaluate what US franchisors are doing to drive franchise development.
Negative trends affecting the US franchise sector:
· Poor to sluggish economy
· Uncertain US political future
· Skyrocketing interest rates making loans less affordable
· Stricter underwriting by banks making those loans harder to get
· Rising costs of supply chains and construction
· Joint employer legislation strangling some sectors
· The FTC considering drastic rule changes for franchisors
Not all trends are bad – never waste a good recession:
· Younger buyers are entering franchising in large numbers
· The economy is forcing people to look at franchising as a viable option
· The move to AI is creating a new spin – franchising as the AI Resistant business
· Service brands are booming
· Franchising still grew despite missing goals
· Franchising has become much more main stream
Top 10 takeaways from the conference:
- Budgets are important
Budgets – for the 16% that actually hit their goals, there was one key differentiator: they exceeded the average budget for lead generation.
The average budget for franchise development advertising was $256k. That’s for a brand that wants to do 40 deals in the year or $21k a month in advertising (includes broker marketing but not broker commissions). For the brands that exceeded goal they spent about 8k in pure advertising per sold owner.
- Cost Per Lead Increasing
The report this year was a shocker – average cost per leads was at or above $300 a lead for many brands. A small advertising budget just won’t work in 2024 – go in eyes wide open and spend more in your budget than you think.
- Renewed Focus on Traditional, Organic Lead Generation
There was a lot of buzz on taking back control of your lead generation efforts and diverting time and resources back to tried and true franchise lead generation tactics. This includes investment on your recruitment website, creating a higher performance site which converts visitors to leads, storytelling content marketing, franchise development videos, podcasts for recruitment and all sorts of digital and social advertising.
- Short Form Video as the New PR and Franchise Lead Generation Tool
The real surprise tactic brands have turned to is using short form video to recruit franchises and replace diminishing PR. This video, focused on franchise recruitment, is rare in our industry but common outside franchising.
Short form video is here to stay – executing this on a daily effort costs about $5k a month but reaches millions of potential people and fuels all sorts of connections.
- Lots of Buzz About Ai
It’s been a full year since Chat GPT launched and it’s the topic most people want to talk about. Here’s the deal though – other than using it to edit videos, improve normal written work or for some basic sales automations, it isn’t a tool that helps people recruit more. It is still amazing but it isn’t new and its quickly become part of our daily lives.
It’s an augmentation that allows us to write better and more and it can easily make us more productive.
Here are the top AI nuggets I heard:
· Use Ai to evaluate phone call transcripts
· Use Ai to create better performing ad copy
· Use Ai to edit videos and add captions
· Use Ai with Zapier and your CRM to trigger sales automations
· Use Ai for SWOT analysis of your competitors
· Don’t use the free Chat GPT or your private or proprietary info might be compromised – use the paid version only for business
The tools are evolving so fast so don’t bury your head in the sand and learn the CORE method of writing Chat GPT prompts. Use it to do your work faster and do a better job of the work you are already doing.
- High Interest Rates Killing Momentum
For some brick and mortar brands, higher interest rates are making expansion difficult. Expand this to more expensive concepts and funding is the main challenge for brick and mortar concepts.
Sadly, there is not likely to be relief in 2024. If your concept is affected, brands are downsizing and thinking about creating solutions for development that fir the year ahead.
- Younger Buyers Emerging – Boomers Aging Out
There are record numbers of younger buyers – both Millennials and GenZ buyers opting for franchises and they have radically different ideas of franchising and differ from older franchisees in how they behave in the sales process.
One important nugget is that the sales process is changing and depending on the generation of the buyer, your salespeople need to also adapt to get peak performance. Younger buyers expect quicker access to info and text communications plus they don’t like webinars or Discovery Days the way older buyers have historically.
A big trend this year was Baby Boomer buyer aging out and shutting down operations rather than selling. Resale programs are more important today than ever before and if you can identify possible owners that might age out, start conversations with them about exits and plans for exit so you are ahead of the curve and don’t lose an otherwise salvageable unit.
- Conversion Types on Your Website Changing
A form is not enough these days!
The survey data showed that 1/3 of the recruitment websites in the survey lack a phone number. This despite the data that shows phone leads close at twice the rate of a form fill.
Look at your website and make sure the number is on every page, near the form. Make sure this either goes to a recruiter or to a call service and not your general phone directory or main call center. Franchise leads are fickle and these are highly valuable calls – don’t waste them.
Integration with Calendy calendars into websites are also becoming more common and produce better results than just relying on forms. Having a ‘Apply for a Franchise’ page in your research funnel that has a form, a phone number, an embedded Calendar for meetings and even a chat with a recruiter is what a modern website looks like.
Remember that younger buyers are mobile only so be critical of your own website or get an experienced vendor who knows franchise sales to give you an audit – this single item can increase sales without much cost.
- You are Only as Fast as Your Slowest Vendor
One theme that came up was we are in a rapidly changing era of franchise recruitment. There are record numbers of people looking at franchising but we’ve gotten lazy about recruitment and taken our eyes off innovation.
- What are US Franchisors Doing for Next Year
Most plan to increase their spend next year and attack organic recruitment. They are using AI as often as they can and using short form videos for recruitment.
Franchisors are investing in new recruitment websites designed to convert and thinking about how to recruit younger buyers.
What are you planning to do in 2024 to grow your franchise brand?
Check out the Franchise Update Media – 2024 US Franchise Development Report here.
For those who are interested, the event concluded with the STAR Awards recognizing franchisors who excelled in recruitment based on mystery franchisee sales inquiries, including categories such as best social media campaign, most effective websites, and prompt call responses.
The big winners were:
Wild Birds Unlimited, Inc.
Right at Home
We Sell Restaurants
Chicken Salad Chick
Congratulations to them all!