Our Value Equation
Most franchisors use multiple strategies and sources to produce leads for prospective franchisees. Almost all of these have a few common characteristics that are at least potentially adverse to the interest of the franchisor.
Consider a typical advertising relationship with a print publication or internet portal. These relationships typically require fixed upfront payments from franchisors without any assurance of results related to that payment. If you run a print ad and receive zero leads, you still have to pay for the ad. Therefore all the quantity risk (the source not producing enough leads) falls onto the shoulders of the franchisor.
A franchisor may decide to advertise with a source on a “pay per lead” basis in order to avoid this risk. Many have learned however that in this scenario they can end up with a large number of leads that are totally unqualified for their franchise. Even though the leads are no good, you still have to pay for them. Therefore all the quality risk (the source producing bad leads) falls onto the shoulders of the franchisor.
At FranChoice, we assume 100% of the responsibility for all marketing costs and efforts to produce the prospects we work with. Unlike many of our competitors, we do not ever approach a franchisor we work with soliciting “marketing assistance” dollars to support local market seminars. We don’t require the franchisors we work with to buy internet ads from an internal web site we control just to milk marketing dollars out of them. We produce our own prospects at our expense and through our efforts.
We spend many hours processing every candidate before they are ever sent to a franchise company. We do everything we can to insure that a candidate is qualified in every important way before we refer them on. We go over their background experience, their skills, their temperament, their goals and their finances in an effort to make sure we’re not wasting the franchisor’s time with our lead.
With FranChoice leads, virtually all of the risk associated with both the quantity and quality of the lead flow falls onto our shoulders. The franchisors we work with don’t pay any fee for our leads until and unless our candidate becomes a new franchisee in their system, and our value equation gets even better than that.
When we do place a new franchisee, our fees are substantial. They need to be, in order to provide an incentive for us to assume all of the expense and effort involved in producing leads for franchisors that are so completely different than those from other sources.
Even though the FranChoice fees are substantial, they usually do not involve any net expense to the franchisor. That’s correct – our standard transaction involves no net out of pocket cost to the franchisor.
Our placements are incremental – above and beyond those from other efforts and sources the franchisor may be using. Other than the referral fee the franchisor pays to FranChoice upon the placement of a new franchisee, there is rarely any other incremental cost related to acquiring a new franchisee via FranChoice.
There is however, and very importantly, a new incremental revenue source that our efforts create for the franchisor. This new incremental revenue source is the initial franchisee fees each new franchisee we place typically pays to the franchisor when they join. The reason this is a new revenue source (unlike all the other initial franchise fees received) is that these incremental additional franchisees would not be created or pay any initial fees without the efforts of FranChoice.
Since these initial fees are usually greater than the referral fees paid to FranChoice, we effectively create a new revenue source for the franchisor that is greater than the total of the fees being paid to FranChoice. This dynamic is what makes the payment of the FranChoice fees represent no net out of pocket cost to the franchisor.
We understand that any franchisor considering working with FranChoice has to weigh the value of the new franchisees we deliver against the costs of working with us. The value of these new franchisees, in a financial sense, comes from the initial and ongoing fees the new franchisees pay to the franchisor over the life of their relationship. This value usually represents a huge number in any franchise system.
Considering the huge potential value of a new franchisee and given that there is typically no net out of pocket cost to the franchisor to receive this benefit, we believe our value equation to franchisors is unparalleled by any other option available to a franchisor interested in achieving incremental growth.
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