Franchise Update Magazine Issue IV, 2013 | Page 38

Grow Market Lead
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2010 and 2011. However, said Wood, “The starting point is
$20,000 or higher to do deals.”
• One-to-one marketing. Calling this “today’s newest recruiting source” for franchisors, Olson reported that 36 of the
101 franchisors surveyed have used one-to-one local marketing to recruit franchisees. Twenty-two, or 61 percent of those
franchisors have generated sales using this strategy, he said.
• Referrals. Again, no significant change here in the number of respondents using this relatively low-cost method of
recruiting leads (59 percent, compared with 58 percent last
year) and those providing incentives to franchisees who refer
prospects that result in sales (60 percent this year, 61 percent
last year). The median referral fee, however, rose significantly,
from $3,500 last year to $4,500 this year; and 15 percent said
they pay $10,000 or more for successful referrals, most likely
reflecting franchisors’ increasing appreciation of the value of
referrals in making new sales.
• Social media sales. The number of franchise sales from
social media sources has steadily increased over the years and is
certain to continue. Fifteen of this year’s respondents reported
making 123 sales through social media, nearly tripling last year’s
total of 46 sales through social media sources by 14 companies.
This year’s numbers break down as follows: 52 through blogging; 49 through LinkedIn; 10 through Facebook; 7 through
Craigslist; and 5 through YouTube.
• Overall closing ratios. Something’s getting better here.
While the numbers for 2013 matched those of the previous
year exactly—leads to sales at 2 percent, applications to sales at
13.5 percent, and discovery days to sales at 75 percent—they
were up significantly from 2010 and 2011. Clearly franchisors
are making more of their opportunities, but it could also be
they are choosing candidates more carefully.
• Profiling tools. Improved profiling tools, as well as better use of them, also contributed to the increase in closing ratios: two out three (68 percent) of franchisors said their use of
profiling tools has helped to increase the quality of their new
franchisees, up from 48 percent last year, and 20 to 30 percent
in previous years. One in five (19 percent) said they are using profiling tools but don’t yet know if that is improving the
quality of their candidates; and one in seven (13 percent) said
profiling tools have not done so.
• Measuring costs. Tracking costs for lead generation
and cost per sale has been a sore point for years—as in, why
don’t more franchisors do it? The news this year showed slight
improvement, with 72 percent of respondents tracking their
cost per lead, up from 69 percent the year before. Sixty percent
tracked cost per sale, down from 65 percent the previous year.
That means 3 out of 10 respondents still don’t track cost per
lead, and 4 out of 10 don’t track cost per sale, the all-important
measure of franchise system growth. The median cost per
lead of $55 rose $5 from the previous year, but is still lower
than the $60 reported the year before that. The median cost
per sale was $8,000, down significantly from $9,452 last year.
• Mobile prospect explosion. It should come as no surprise
Franchiseupdate Iss u e IV, 2 0 1 3

that more prospects are using their mobile devices to research
and contact franchise brands. According to Landmark Interactive, that number doubled from August 2012 to August 2013,
rising from 18 percent (10 percent phones, 8 percent tablets
in 2012) to 36 percent (23 percent phones, 12 percent tablets
in 2013). Desktop usage in this area dropped from 83 percent
in 2012 to 65 percent this year. “There is a huge movement
toward mobile,” said Olson, adding that the financial qualifications of mobile users are higher than for those using desktops to research franchise brands. The message clearly is that
franchisors must adapt their website franchise development
sites to these mobile devices.
For ordering information on the 2014 Annual Franchise
Development Report, see facing page. n

Key Findings
• Communicating “on the go” is exploding. The
percentage of prospects using mobile phones to research
franchisors doubled from the previous year. Franchisors must adapt their technology to handle the growing
use of cellular devices and tablets or be at a competitive
disadvantage.
• Social media is for more than just finding friends.
An estimated 87 percent of franchisors have a Facebook
link on their website, and 73 percent have a Google+ corporate page. However, franchisors still must learn how to
use social media better to make it work as part of their development strategy.
• Profiling tools are powerful. Two out of 3 (68 percent) of franchisors believe profiling tools increase the
quality of new franchisees.
• “Who you know” still rules. When it comes to
getting the deal done, 6 in 10 (59 percent) of franchisors
say referrals have the highest close ratio of all lead generation sources.
Some good news: Franchisors are working harder to
align the efforts of their various departments. Olson says
research shows tha