This blog gives consideration to lead generation costs, training and managing in-house staff. Advantages and disadvantages of outsourcing your franchise sales staff. And how brokers may or may not fit in your lead generation and franchise sales efforts.
Whether you are just starting to build a franchise system or you’ve been a franchisor for years, you will be continually asking these questions for years to come. “How can we sell more franchises?” “Is there a better way to sell franchises?” “How do we more effectively screen and choose desirable candidates?” “Where do we find those “more desirable” candidates?” “And how do we attract them into our sales process?”
Ask those questions to a group of experienced franchisors and you’ll hear many and varied answers. Why? Because there is no one right answer. Different approaches work for different franchises and different industries. But what almost all experienced franchisors will usually agree upon is this – no matter what approach you take to expanding your franchise system, having the right salespeople representing your company is the key to success.
Knowing this, all other sales details should be placed on the back burner until you’re confident you’ve got the right people selling for you. Figuring out how and where to generate leads and whether you should be incorporating the latest Webinar technologies into your sales process are always very secondary concerns. If you don’t have the right sales team in place, nothing else really matters. For all franchisors, in all industries, putting together the right sales team should be priority number one.
Currently, when developing a sales team, franchisors have 3 choices. They can hire and manage their own in-house sales team. They can contract their sales to an experienced outsourced sales team. Or they can work with franchise brokers, who represent many franchises and help buyers make buying decisions. Which way to go is not an easy decision, but it is a critical one. To better shed light on the subject, let’s take a look at each option and weigh its pros and cons.
Building an in-house sales team
For many years, this was a franchisor’s only option. Experienced and inexperienced sales employees are hired, trained and managed all in-house. This is still an attractive option for many franchises. For franchisors who do not mind the responsibility of managing a department of employees, keeping a sales team in-house allows a franchisor to more closely monitor his crew, with all the obvious accompanying benefits. And just like in any industry, if sales are going well, having a staff of salaried and benefit-receiving sales people who only receive small commissions on top of salaries, helps keep expenses down and profits up.
However, you may have noticed that the benefits mentioned above are dependent upon one critical assumption – that sales are going well. When sales are not, an in-house sales staff has the opposite effect on a company, draining capital as salaries and benefits continue to demand payment without accompanying production. So, how do you know if an in-house sales staff is the road for you? Well, the first thing to consider is your franchise sales experience. For your team to be successful, it must be lead by an experienced franchise sales person with documented franchise sales success. If that sounds like you, then an in-house sales team could very well be an attractive option. If that’s not you, it doesn’t mean that an in-house team is out of the question. What it does mean is that you’ll have to hire an experienced franchise sales person to lead the way. Seems like a simple enough solution. But the difficulty lies in the fact that there just isn’t an abundance of experienced franchise sales people out there. Most of them are gainfully employed. Which means to snag one, you’ll have to offer an attractive compensation package. Experienced franchise sales people routinely receive salaries in the six figures with commission structures that can easily double their compensation. In other words, experience doesn’t come cheap.
The other major factor to consider besides experience is your time and ability to manage a sales department. Even if you have the franchise sales experience and can forego the costly experienced salesperson for a group of inexpensive, hungry and aggressive young newbies, can you and do you want to manage that group for a good chunk of your working day every day?
Outsourcing your franchise sales team
Over the years, with so many franchisors recognizing that they neither had the necessary franchise sales experience nor the desire to roll the dice on significant upfront salary commitments to experienced sales employees, there has cropped up another attractive option – the outsourced, fully turnkey franchise sales team. Outsourced sales teams are a direct answer to the common problems associated with housing and in-house staff. With an outsourced sales team, well, let’s qualify that by saying a GOOD outsourced sales team, you inherently have the experience that will be the cornerstone of your sales success without the daunting commitment to guaranteed employee salaries. Most of the time, outsourced sales teams are comprised of experienced sales people who demand considerably less upfront monetary commitment and who receive the bulk of their compensation from sales commissions. This age old “reward for results” relationship with an outsourced sales team can be very attractive to many franchisors, especially newer franchisors who are light on both experience and funding. So, let’s take a deeper look.
Besides the benefits mentioned above, the biggest advantage of an outsourced sale team is that they can bring an immediate “Plug and Play” sales process to your franchise. Having sold franchises for a number of franchises in a number of industries, outsourced sales teams will usually know exactly what tools they need you to provide. In fact, if you don’t have the sales tools they need, most of them can create them for you. Their experience should considerably shorten your company’s learning curve and thus, your initial sales should come much sooner. Note, there is a lot of “shoulds” in those last few sentences. Just like with anything else, there are varying levels of quality in any industry and an outsourced sales team is no exception. Do your home work and speak to references before making a decision.
So, an outsourced sales team can bring experience, less upfront costs and faster initial sales to your company? Sounds pretty good. So, what’s the catch? Well, like with any outsourcing, you should expect to have less control over your sales team than you would if they were your employees. After all, especially if you’re a newer franchise, you will be contracting with a team of franchise sales experts who not only certainly know more about franchise sales than you, they probably know more about franchising as a whole than you. That can complicate the relationship a bit and you should be prepared to navigate those intricacies before signing on the dotted line. Another thing to be prepared for is that if sales are going well (there is that darn assumption again), your cost per sale could be higher that if the same sales volume was being produced by an in-house team.
Using Franchise Brokers in your Sales Process
For those of you who don’t know, franchise sales brokers are third-party entities that try to match interested franchise buyers with compatible franchises. Just like mortgage brokers match home buyers with any number of lending institutions that the broker works with, franchise brokers will often have contracts with tens if not hundreds of different franchises. The broker’s “matching” services are absolutely free to the buyer. The brokers make their money by receiving commissions from the franchise once a buyer has been successfully matched and has become a franchisee.
Like an outsourced sales team, brokers make their money from commissions, once again an attractive option for franchisors hedging away from large upfront commitments. In fact, many brokers pay for their own leads, thus cutting a franchisor’s initial cash outlay even more. But there are significant differences between a broker and an outsourced sales person. A broker’s job is to develop a relationship with the buyer and, after to getting to know the buyer, their preferences and their goals, match them to suitable franchises. Once that matching is done, the broker’s job is finished, but the buyer still has to be taken through a detailed sales and screening process by the franchise. With hundreds of different franchise clients, a broker does not and should not be expected to know every detail about your franchise. He or she is simply matching buyer personalities and desires to general industries and companies. Also, keep in mind that a broker is not generally limited to passing a qualified candidate along to only you. They may (and usually do) pass one candidate along to a number of franchises, including your competitors. So, if you choose to begin working with franchise brokers, know that you also need to have either an in-house sales team or an outsourced sales team to perform the comprehensive sales and screening process once the franchise broker has passed along a qualified buyer.
Franchise brokers talk to a lot of potential franchise buyers. In fact, that’s what they do, all day, every day. So, the contracting with many brokers for straight-commission arrangements can result in a heavy influx of qualified candidates that come to your company’s doorstep absolutely free of charge until they pay a franchise fee and become franchisees. And that is the primary benefits of brokers. The catch? As I mentioned above, brokers do not replace your own sales team. So, adding a broker into the equation can lengthen the sales process for a buyer by adding another layer and another step. And it will almost assuredly result in a much higher cost of sales now that you’ll be paying commissions to both your sales team and your broker.
So, what to make of all this?
Like so many industries, franchises have been moving toward outsourcing in so many areas. From support, vendor relations, product fulfillment and now sales. And the choice to keep things in house versus outsource in the arena of franchise sales is no different than many. Factors like control, commitment, trust and capital all play a part. But as I’ve pointed out, the decision can be reduced to a couple of key elements – experience and money. If you have franchise sales experience and what it takes to grow your franchise and you don’t mind the responsibilities of managing a sales team, over the long term, an in-house staff will provide you with the best ROI. But remember, our starting block for building our sales team has to be experience. So, if you don’t have it and you’re not willing to pay for it, then an outsourced sales team will usually make the most sense. And brokers, where do they fit in.? Brokers are not truly a third option. As we’ve discussed, they can be a productive compliment to either your in-house or outsourced team. You should give brokers serious consideration after your team has been establish and is having success.
By: MJ Alto
