Is Franchise Sales Outsourcing the Best Alternative?

There are three basic alternatives to franchise sales – each with their benefits and drawbacks: hire an experienced franchise salesperson, train an experienced salesperson how to sell franchises (or sell them yourself), or use franchise sales outsourcing.

The Cost of Experience

An experienced franchise salesperson in today’s marketplace will typically command a salary of between $85,000 and $100,000 and will have bonus potential up to $125,000 or more.  Superstar franchise salespeople can command two to three times that amount. 

In addition to direct costs, the franchisor would need to spend money on administrative staff, benefits, FICA, etc.  Should the franchisor use a recruiter to find a good person, their expenditure to hire this individual would be a recruiting fee of $25,000 or more.  And if the individual is recruited from another market, the costs of moving the employee need to be factored into the mix.  So fully loaded, a franchisor might be looking at a commitment of $175,000 or more for an average franchise salesperson. 

And this assumes that the franchisor can lure someone away from an established franchisor to join them in the first place.  At a target of fewer than 20 franchises per year, most established franchise salespeople are not interested in joining a start-up.  Remember: this salesperson has no real idea of the start-up’s long-term commitment to franchising, their willingness to fund marketing, and the degree to which they will be able to manage the franchise program. 

Moreover, even experienced franchise salespeople may never have successfully grown a start-up, heightening the risk of failure to both the franchisor and the franchise salesperson.   In short, it is a risky proposition for a franchise salesperson, and superstars need not apply.

The Cost of Training

The alternative: find a salesperson and train them how to sell franchises – which may lower costs and increase the chances of filling the slot – but will also dramatically increase the likelihood of failure. 

The sale of franchises is harder than it looks.   Franchisors must ask people to quit their jobs, give up the perceived security of a paycheck, and invest heavily of their net worth and themselves to pursue a dream.  So even good salespeople can fail in this environment.

If this individual does not work out, not only does the franchisor need to go back to the drawing board, but it is also likely that it has lost most of the value of the franchise marketing done over that timeframe. 

Since it takes 12 weeks (on average) to make a franchise sale, a franchisor might go six months under this scenario before learning whether or not a salesperson is going to work out.  So a franchisor could easily spend $100,000 if they make a mistake in this process -- with limited to no results.

The Franchise Dynamics Alternative

With Franchise Dynamics, on the other hand, the franchisor will get a proven franchise salesperson directing their sales efforts.  They will get a commitment for a certain level of performance.  And the fee structure is similar to paying a cumulative draw against a commission. 

More importantly, a franchisor’s monthly fixed costs will be much lower.  And there are no recruiting and no relocation costs – so the franchisor can spend more of their money on franchise marketing for faster growth.

The bottom line: at a moderate level of franchise sales, the Franchise Dynamics model offers substantially less risk and significantly improved chances of return – at a cost that is similar to or only slightly higher than a franchisor would pay for alternatives.