Find out what franchise buyers are looking for - and what causes them to walk away from deals.
Getting started in the franchise industry can be challenging for new and emerging franchisors, who sometimes struggle with the transition from business owner to franchise founder.
When it comes to selling franchises, having the right mindset – and knowing what franchise buyers and brokers look for in a brand – is critical. From brand reputation to franchisee support, realistic numbers and marketing strategies that align with your franchise opportunity profile, making sure your franchise offering keeps the buyer’s interests in mind at every stage of the sales process can improve your chances for growth and success as a franchisor.
In this article, we’ll uncover the secrets of what franchise brokers and buyers look for in a franchise opportunity … and the mistakes franchisors make that can lead to lost deals and missed sales.
What attracts franchise brokers and franchise buyers to a brand?
For franchisors who are looking to grow their business and boost franchise sales, perhaps nothing is more important than understanding the key factors that attract qualified franchise buyers and brokers to a franchise offering. While those factors can sometimes differ depending on a brand’s industry, several determinants often recur among franchisees and brokers across the board.
1. Brand recognition
Franchise buyers are often attracted to franchise systems with a history of success and a reputation for quality – particularly those with recognizable names that are nearly synonymous with the products or services they provide, such as The UPS Store, Chick-fil-A or Crumbl Cookies.
Regardless of whether a brand is a major player or a fledgling startup, though, every franchise system needs to be able to back up its reputation with genuine numbers that make sense for franchisees to invest in. Without those qualifiers, franchise brokers and prospective buyers may walk away to find a sturdier opportunity that can back up its claims with real-world data.
2. Franchisee support
Experienced franchise brokers understand that the success of a franchise system depends on the success of its franchisees. Because of that, brokers are often on the lookout for franchisors who prioritize their franchisees’ success as business owners.
Although the support offered to franchisees can differ between brands depending on their industry, it often includes the following:
Site selection assistance
Construction and build-out help
Pre-opening training and support
Ongoing operational assistance
Local marketing help
Technology and equipment
Access to vendors and services
Creating a path to success for franchisees is critical for growing a franchise brand. When it comes to attracting brokers and candidates, franchisors can get a leg up on the competition by offering a high level of franchisee support and demonstrating that they take their brand’s success seriously down to the unit level.
3. Realistic numbers
Because investing in a franchise business isn’t cheap, franchise brokers and candidates typically look for franchise opportunities with good ROI potential that align with candidates’ budgets and economic goals. Because of that, it’s important to be straightforward about your franchise offering’s estimated initial investment, operating expenses and financial track record during the franchise sales process.
A key part of that process is working with an experienced franchise attorney to develop a Franchise Disclosure Document (FDD) that tells a compelling economic story about your franchise system. To understand the economic status and ROI potential of a franchise brand, brokers and prospective buyers typically look at two specific sections of the FDD to weigh the potential risks and benefits of investing in a franchise.
Item 7: Estimated Initial Investment
Item 7 of the FDD provides franchise brokers and prospective buyers with the anticipated range of expenses to start and open a franchise business. This includes, but is not limited to, everything from the initial franchise fee to build-out costs, reserve capital and more.
Because the disclosures in Item 7 deal with important startup costs, providing prospective buyers with an accurate range of expenses is critical for preventing franchisee undercapitalization and other detrimental financial issues during the opening process.
Item 19: Financial Performance Representation
Although it’s an optional section of the FDD, Item 19 financial performance representations can help some franchisors competitively position their FDD to make their brand more attractive to brokers and potential buyers.
The information provided in Item 19 can help brokers and prospective buyers understand the numbers behind your franchise system, including but not limited to corporate gross revenue, projected revenue for franchisees, estimated profit margins and more.
For startup franchise systems without an extensive financial performance history, however, Item 19 might not be enough to keep prospective franchise buyers interested in doing business with you. In those instances, it’s important to lean more heavily on something else: the level of support you can provide to your early franchisees to help them succeed as business owners.
Approaching Franchise Sales from a Buyer's Perspective
By ensuring that your franchise offering can add genuine value to the lives of your franchisees, you can increase your odds of success and build a reputation as a quality franchisor – something that never fails to catch the eye of franchise brokers and candidates. Because of that, it’s important to approach franchise sales from the perspective of a franchise buyer.
When developing your franchise sales discovery process, consider the following points:
Opportunity. What opportunities does your franchise offering provide franchisees? Determine how your offering can help them accomplish their goals as business owners – whether those goals are financial or lifestyle-based.
Support. As a franchisor, do you actively create pathways to success for your franchisees? Think about the assistance and support you provide to franchisees, from pre-opening to legacy-building.
Transformation. What value does your business add to franchisees’ lives? Consider the ways your franchise offering can positively impact franchisees’ lives and transform their futures.
By keeping in mind the ways your franchise offering can help franchisees accomplish their business, economic or lifestyle goals, you can ensure that your brand is positioned competitively in the marketplace.
Why is supporting franchisees important?
The success and growth of your franchise system depends on the success of your franchisees. By creating a pathway to success for franchise buyers, you can ensure that your franchise system will be sturdy and sustainable as it matures over time.
As a franchisor, your franchise sales process should address the specific needs of franchisees while avoiding generic language and empty promises. Because satisfied, successful franchisees provide validation for prospective franchise buyers during the discovery phase of the franchise sales process, it’s critical to have patience with your existing franchisees while focusing on the continuous improvement of systems and processes to support them.
What makes prospective buyers walk away from deals?
Prospective buyers can walk away from franchise deals for a variety of reasons. However, some common negative experiences can cause franchise buyers and their brokers to head for the door during the discovery phase of the franchise sales process.
These experiences include, but are not limited to:
Lack of support. Franchise buyers want to know they’ll be supported and provided with a framework for success as franchisees. In the absence of a supportive framework, buyers could start looking to competitors that offer more franchisee support.
Absence of validation. It’s important to back up your claims with real numbers. In the absence of data, financial disclosures and other information – or in the absence of satisfied franchisees – prospective buyers may look elsewhere for franchise opportunities.
Unprofessional behavior. It should go without saying, but professional behavior is a must for franchisors. Always treat prospective buyers with respect and maintain proper etiquette on discovery days.
Always remember that nothing is set in stone – prospective buyers can, and do, walk away from deals for a variety of reasons. By keeping candidates’ interests in mind and putting franchisees first in terms of support, you can increase your chances of closing deals as a franchisor.
How to Attract GoodFit Franchise Buyers
A franchise system is only as good as its franchisees. To ensure your franchise brand is positioned for success and has the potential to grow sustainably, recruiting the right people during the franchise sales process is critical.
1. Create a GoodFit Franchise Opportunity Profile
When developing your opportunity profile, consider the following questions about your business and the opportunities it can provide franchise buyers:
Opportunity category. Are your target franchisees looking for supplemental income, lifestyle opportunities such as working from home, income replacement or the opportunity to build a legacy for future generations?
Unit economics. Evaluate your offering’s estimated initial investment. How much capital will franchisees need to open and operate their franchise business?
ROI potential. What revenue and profit margins franchisees can expect?
After determining your franchise offering’s opportunity profile, you’ll have a clearer understanding of who your target franchisee is – and how to build a scalable process for converting franchise leads.
2. Streamline your marketing strategy
Marketing is a key component of the franchise sales process. Because of that, it’s important to have a clear understanding of who your target franchisee is and how – and where – to reach them.
By developing a marketing strategy that specifically communicates the opportunities and support your franchise offering provides franchisees, you can attract more attention from brokers and prospective buyers while ensuring that your audience is aligned with your brand’s values, mission and opportunity profile.
To learn about branding for franchisors, check out our How to Build and Deploy Your Brand Story Masterclass.
3. Demonstrate scalability
As a successful business owner, your corporate locations are likely thriving. However, franchise brokers understand that running a business is different from operating a franchise system. Because of that, it’s important to demonstrate that the success of your first franchisees can be reproduced across all future locations using your established systems and processes.
By demonstrating your brand’s scalability, you can establish validation and build trust with brokers and prospective franchise buyers while growing your franchise system in a way that’s sustainable, supportive and growth-oriented.
If you’re ready to perfect your franchise sales process and attract GoodFit franchise buyers, we can help you succeed. Contact us today!
