A comprehensive analysis of franchise sales data from over 600 brands reveals how franchise development deals were forged in 2020

Every year, FranConnect – a leading franchise management software – publishes a comprehensive analysis of franchise sales data from hundreds of brands using its Franchise Sales Module. The report gives incredible insight into the effectiveness of a wide range of lead generation tools and presents critical data that will help franchisors zero in on a growing demographic of Canadians who are seeking business ownership opportunities in the wake of COVID-19.

“My position has allowed me to have a very unique vantage point, as I see the data from over 600 franchise brands,” explains Keith Gerson, president of franchise operations at FranConnect, who has aggregated and analyzed the data from the report. “The data details the concentration on deals vs. leads, a study of where deals came from, the channels that produced the most deals, where to cut back on spending and where to feed, and a hard look at where the biggest issue in execution lies.”

Here, we’ll take a look at FranConnect’s 2021 Franchise Sales Index Report to help franchisors gain insight into the franchise development channels that have produced the most deals in 2020. With this insight, franchise systems can equip themselves with best practices to execute on their leads for continued success in the face of the ongoing global pandemic.

A Look at the Data – Who was Selling Franchises in 2020?
The COVID-19 pandemic has indeed taken its toll on the franchising industry. According to the report, total deals fell by 28.8% in 2020. Hit hardest were enterprise brands (systems with more than 200 locations), seeing a 42.7% decrease in deals. Meanwhile, mid-market brands (systems with 76 to 200 locations) improved in 2020 by 12% year-over-year (YOY).

When it comes to the top-performing franchise sectors in 2020, although commercial and residential services franchises only made up 16% of the brands surveyed in the report, the sector accounted for 33% of all of the deals accomplished in 2020. Conversely, franchises in the personal services sector represent 35% of the brands, but 25% of the deals, indicating a decline in leads along with lower lead-to-deal conversion rates. Quick service restaurants were also adversely impacted, as this category represents 18% of the brands surveyed and only 11% of the deals. All in all, home services and personal services franchises make up 57% of all deals.

Where Did those Leads Come From?
It is not surprising that the COVID-19 pandemic has Canadians spending more time online. According to Statistics Canada, just over 4 in 10 survey respondents indicated that they’re spending more time on social media and messaging services (41%) since the onset of the pandemic. Despite this fact, the report’s findings that a franchise brand’s website was the biggest source of deals (23.6%) should be looked at with a grain of salt.

In our increasingly digital world, all roads eventually lead to the website, so it’s likely that a prospect was brought there through another sales channel. That said, referrals and franchise referral consultants (also referred to as brokers) as deal sources should not be overlooked. In 2021, referrals made up 19% of all deals, followed by franchise referral consultants at 17% of deals.

The Number to Watch: Lead-to-Deal Metrics
Oftentimes, lower numbers of deals don’t relay the truth of the effectiveness of the source. This is where a vital metric – lead-to-deal ratio – becomes incredibly important. This metric demonstrates the number of leads required to culminate in a deal by source. This metric, ultimately, speaks to the quality of the leads coming through a particular source.

When it comes to the top lead-to-deal ratios, franchise referral consultants and referrals were again top of the heap in 2020. The report indicates that when compared to other “top sources” of leads such as social media, it only takes as little as 20 leads through the referral or consultant funnel to produce a sale. On the other end of the spectrum – portals (online franchise directories like LookforaFranchise.ca) came in at 0.3%, which equates to 300 leads to make just one sale. And at 0.1% of sales coming from social media, it would take 1,000 leads to culminate into one sale.

“Speed to the Lead” – Timelessness Matters
FranConnect’s report provides a wealth of valuable insight into how franchise development deals came to fruition in 2020, but one staggering fact stands out: 85% of leads that closed in the FranConnect system were from clients who received a call-back from a salesperson in four hours or less.

According to the report, 45.8% of new leads “dropped off” because franchise salespeople were unable to make contact with the prospect. This is telling, explains Gerson. 

“When studying lead drop-off rates, we find that we are primarily losing them in the ‘new lead’ stage. And the primary reason is attributed to ‘non-response.’ Could it be that attempts are made by phone, which can be disruptive and unrecognized, and by email, which get lost in an ocean of other emails? I’m seeing that there are two remedies here – one is that sales and marketing departments need to reach out to leads no fewer than seven times. Frankly, it should be a rare occasion when a lead is killed. Additionally, SMS text messaging has the best response rates of any method of engagement.”

Gerson adds, “The key here is augmenting your sales staff with tech that is called to help them respond to leads quicker, book appointments, and to make sure clients show up for their booked appointments.”