This post also tries to answer the question: How Many Franchise Opportunities Does The Serious Franchise Lead Look At?
These questions are difficult to answer entirely accurately, but this is my take based on over 12 years experience and dealing with all the main franchise portals and many different franchise brands across all sectors, through the systems we use, maintaining an extremely accurate data set and also using data from the BFA NatWest Survey 2015.
Serious leads I define as leads that eventually end up buying a franchise, and in my experience these leads will start out researching between ten and fifteen franchise opportunities and then narrow it down to an average of three. They will then focus their due diligence on these three, leading to them meeting two or three different franchisors before final decisions are made and a franchise agreement signed.
Let’s look at some facts and figures which are as accurate as anyone will be able to come up with based on the records I’ve kept:
Every year, around 12,000 people make an enquiry into franchising.
In the region of 700 of those people (around 6% of the total) will go on to sign a franchise agreement within 12 months of making an enquiry.
A further 230 (2%) will sign a franchise agreement 12-24 months after making their first enquiry.
70 people (nearly 1%) will sign a franchise agreement more than 2 years having made an initial enquiry. (For me personally, the record was over 3 years!!).
If we break this down, for every 100 franchise leads generated across the entire network, only 6 people will end up signing a franchise agreement within 12 months; 2 will sign an agreement in year 2, and 1 will sign an agreement in year 3 and beyond.
Over time, if the number of enquiries stayed the same (which it roughly has over the last 5 years), then, after allowing for a 2-3 year lag, there will be around 900 people signing franchise agreements every 12 month period.
Given there are over 900 franchise brands currently trading in the UK, with around 350 of these actively recruiting in any calendar year, this means that if franchisee recruitment was perfectly shared over a 12 month period, and based on the figures above, each franchisor would gain 2.5 new franchise owners per year.
Why doesn’t this happen?
Why is it that only 20% of franchise brands in the UK end up recruiting around 75% of the available potential franchisees every year?
- 20% of franchisors actively recruiting franchisees is around 70.
- 75% of those people signing franchise agreements is 675.
This means 70 franchise brands are recruiting an average of 10 franchisees a year*, whilst the other 280 franchise brands are recruiting an average of 1!!
*Many of these brands are in the Hotel & Catering sector (which includes hotels, coffee houses and fast food chains) with recruitment averaging nearer 20 per year so this will skew the data a bit.
The main reason for this: The majority of emerging franchisors and a high percentage of existing franchisors simply don’t have an effective franchisee recruitment process.
For every serious or qualified lead who attends a meeting with the franchisor, they are whilst comparing that experience with one or two others.
Franchisors can get a good idea from their meetings-to-franchisees ratio how many are lost to other opportunities. This is why it is common the best brands are only converting 1% of enquiries they receive into franchisees. Any brand achieving above a 2% conversion from enquiries to franchisees is doing exceptionally well, or being much more targeted with their approach.
Of course there are always some leads who show great intent, attend a lot of meetings, but never actually end up investing in a franchise. These leads take up a huge amount of time, and are hard to identify early in the process, because they are people who genuinely would like to invest in a franchise, but never actually follow through for many different reasons (fear of failure, lack of family support, confusion as to which franchise to invest in, etc).
An effective franchisee recruitment process must focus on these 4 main areas:
We can show you how to appeal to a higher percentage of the 12,000 people making an enquiry into franchising each year.
We can ensure that you maximise your conversion rate from enquiry-to-franchisee; ultimately we want to show you how to ensure you reach and remain in the top 20% of franchisors measured in terms of recruiting quality franchisees…