Perfecting the search for franchisees
Gone are the simple days of passive franchise “recruitment,” when potential franchisees were the ones making the first-level decision of who would own a franchisor’s next store. Now, with a tight credit market and fickle, thrifty consumer base, franchisors’ seeking the right franchisees with the right resources is more important than ever. Many chains are starting to actively recruit a specific type of franchisee in a precisely engineered way.
“There is a definite trend of being more ‘savvy’ in the franchise development process, leveraging technology,” said Eric Stites, founder of Franchise Business Review, an online publication covering franchise news. “With lead flow still at about 50 percent of what it was a few years ago, and demand for small business financing being far greater than supply, franchisors have to do everything they can to attract, recruit and award franchises to a much more savvy prospective franchisee.”
Those businesses that are in the enviable position of actually expanding, such as CiCi’s, Papa Murphy’s, and Straw Hat Pizza, for example, have all utilized different ways to reach their target franchisees. Most of them have defined their targets fairly narrowly.
Just as technology has become more important for attracting consumers, it’s also become a great tool for franchisors to attract quality franchisees. In fact, it’s one of the best weapon’s in CiCi’s arsenal for their current expansion efforts, which targets 70-plus undersaturated markets.
Their secret weapon in vetting potential franchisees? Process Peak, an online software company that helps generate leads, then helps assimilate and vet them.
The first part happens through social media recruitment. Process Peak builds custom Facebook tabs and pages for their clients (like CiCi’s) that describe franchise opportunities. These pages are advertised to targeted Facebookers who have been looking at similar pages.
The leads captured from this forum are then channeled to a process management system that walks the candidates through the entire application and discovery process. For CiCi’s, there are several steps to becoming a franchisee. “So the candidate has the trackable portal that shows them everything that needs to take place between them contacting CiCi’s and flying out to meet with them (to sign papers),” said VP of social development, Jon Carlston.
The system is also a qualifying one: For example, when a candidate is completing his or her preliminary research on real estate, the system will capture for the franchisor whether the candidate would even be approved for leases. Overall, it offers the franchisor a richer amount of information about candidates in less time.
And the multiple discovery questions help weed out the least serious inquirers immediately.
“The potential investor’s willingness to follow the process is telling, because franchising is about consistency,” said Carlston.
Some franchise systems, however, have an even more targeted franchisee pool – like Straw Hat Pizza, whose CEO is targeting Indian immigrants for his expansion plans.
Cash is still king
Straw Hat Pizza CEO Jonathan Fornaci signed on to lead the retro California pizza chain about 2.5 years ago. Since then, he said, the number of franchises have about doubled – from 38 to 77. He hopes to have 100 by the end of the year.
A big part of Fornaci’s success has been overcoming the finance drought by targeting a cash-rich group that can put up their own money for expansion.
“They mostly came in from first generation Americans, new immigrants, most of the Asian populations: India, Pakistan, those areas,” he said. “And it worked out well, because they have the cash in hand.”
And they often have professional, well-to-do family members who can give them more capital, he said.
Straw Hat Pizza has targeted this group in several creative ways: Running ads on Indian TV channels and print publications, conducting discovery days, even targeting entertainment events that attract these coveted populations, like a recent concert in San Francisco that brought in 25,000 to watch the stars of Bollywood.
Papa Murphy’s recruitment focus is somewhat similar, from a top-level perspective. The company is also making access to resources among the primary qualifiers for recruitment.
But this concept is experiencing success with a separate set of individuals. The company is assertively pursuing established multiunit franchisees to be area developers in their current expansion plans around the nation. Papa Murphy’s vice president of development Steve Figliola said these are the people that have the proven experience and resources for success.
Owners of any concepts will do. Business development manager Rhonda McGrew said Liberty Tax is among one of the concepts their area development franchisees have come from. (Though she also admits they tend to award to an inordinate amount of Subway owners.)
Leads are achieved mainly through word of mouth referrals, internal prospecting, trade publications, and some social media endeavors.
The latter is a practice Fornaci is less impressed with. He doesn’t believe that leads from Internet portals are discriminating enough. “The quality of leads just isn’t as good. Someone might be interested, but they don’t have the cash,” he said.
That’s a view with which Eric Stites doesn’t agree. He believes that too much emphasis has always been put on candidates’ financials – more now, because of the lending environment.
“The focus of the recruitment process should be on the candidates' fit first: background, skills, personality, and history of success,” he said. “If franchisors spent much more time on finding candidates that were the right fit for their brand and then worried about how to get them the financing they needed, they would have a much higher performance and success rate.”