65 Percent of Franchisors Continue Proactive Franchise Sales Efforts Amid COVID-19 Crisis

When COVID-19 forced thousands of franchise businesses nationwide to close in mid-March, sales plummeted within days — and widespread layoffs and furloughs began. But many franchisors kept the franchise sales engine running in anticipation of an influx of potential buyers looking for business opportunities as unemployment soared.

In a March 2020 survey of 233 executive of franchise brands, FranConnect, the leading provider of franchise management platform solutions, found that 65 per cent of franchisors were actively moving forward with franchise sales efforts despite the paralyzing impact of the COVID-19 crisis. The survey showed how franchise businesses of different sizes and industry sectors were reacting through changes to their strategy and operations.

Among the key findings:

  • FranConnect found nearly all brands surveyed in business services (86%) and commercial and residential services (89%) were continuing their sales efforts;
  • However, 75% of full-service restaurants — one of the hardest-hit segments over the last month — reported halting franchise sales.
  • Over half of micro-emerging brands (under 25 locations) stated they’d stopped their franchise sales efforts, compared to only 16% of those with between 100 and 500 units.

It wasn’t surprising to see franchisors scaling back or ceasing their franchise sales programs. At the time of the survey, 67 per cent of franchisors expected system sales to return to pre-pandemic levels within six months, so a conservative approach to new growth made sense. However, other segments that hadn’t seen nearly the same degree of revenue declines were continuing their recruitment efforts. Many franchisors have seen increased interest in their franchise opportunity as millions of unemployed Americans seek the security of being in business for themselves, but not by themselves.

The good news is that franchise development is still open for business — even if physical locations aren’t. Brands that can keep franchise sales going should, keeping in mind the typical lead-to-deal timeline may take longer given the current state of getting loans approved and the general climate of uncertainty.

However, as franchisors prepare for the increased number of leads, now is the time to rectify any issues in the sales process. FranConnect’s Franchise Sales Index Report, released in April, puts a spotlight on some of the biggest challenges’ brands face in closing deals.

The sixth annual report is highly differentiated from other franchise development reports, as it’s the only comprehensive study of actual data (anonymized and aggregated) from nearly 600 franchise brands from FranConnect’s Franchise Sales Application. The data is segmented by franchise industry and the number of franchise locations, while other reports are derived from survey data and mystery shops, which can be less reliable.   

Key findings included:

  • Out of 7,390 sales that were accomplished in the FranConnect CRM in 2019, 85.2% of the deals that were achieved were those that were contacted within four hours or less.
  • Though most franchisors would agree that a 30-minute response time is ideal, only 12.5% were able to achieve that result, and in total only 16.5% were able to respond to leads in four hours or less.
  • 74.2% of leads in franchisor databases never received a call and 56.9% didn’t receive any communication at all.
  • Referrals have the greatest conversion rate (6.6%).

Franchisors should be setting themselves up to handle what could very well be significant demand in their franchise opportunity. Any lack of or delay in communication could cause a lead to drop out and go to another brand or competitor.

During a webinar FranConnect hosted in early April titled “Franchise Sales in the Age of COVID-19,” franchise experts shared best practices for marketing franchise opportunities. One important topic covered was how brands should communicate their franchise opportunity during this very sensitive time.

“Franchisors should review their recruitment messaging to make sure it doesn’t appear tone deaf. You can talk about your franchise opportunity, but it shouldn’t be as overt as you’ve done in the past,” said Lorne Fisher, CFE, CEO and Managing Partner at Fish Consulting, a PR agency specializing in the franchise industry. “Prospects want to see how you’ve supported franchisees to help them weather the storm, including how you modified operations to help them continue to generate revenue. They also will look positively upon those brands that stepped up to help their communities in their time of need.”

Catherine Monson, Chair of the International Franchise Association and CEO of FASTSIGNS International, Inc., is hopeful the franchise industry will rebound quickly.

“Through recessions, natural disasters, and other widespread crises, we’ve continued to see the resiliency of the franchise business model and the benefits of being in business for yourself, but not by yourself. Franchisors and franchisees have benefitted greatly from sharing best practices with each other, enabling them to endure the crisis,” said Monson “Although our community has never seen anything like COVID-19, I have no doubt we will come out stronger having been through this together.”

To download FranConnect’s latest 2020 COVID-19 report, visit https://go.franconnect.com/covid-19-resource-center.

Keith Gerson, CFE President of Franchise Operations, FranConnect

A Certified Franchise Executive, Keith has more than 40 years of executive level expertise creating and building leading franchise systems. A highly respected thought leader, Keith works closely with many of FranConnect’s Customers Executive Teams. His books, webinars, and keynote addresses have created a large following. His latest book, “The Franchise Book of Mentors” was released in September, 2019 and his all new 2020 Franchise Sales Index Report will be released in early May, 2020  

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