Franchise Goal Setting Part 1: How Much Does It Cost to Sell a Franchise

Growing a franchise requires careful planning, and one aspect of the development process is the franchisor determining how much they will spend to make a sale. Unfortunately, there isn’t exactly one right answer to “How much does it cost to sell a franchise?” Different franchisors leverage varying approaches, and the cost to sell will hinge mainly on existing resources and long-term goals.

“We look at marketing, trade shows and hosting our potential candidates for our budgeting purposes,” explained Todd Haavind, VP of franchise development at Camp Bow Wow. “We base our marketing budget on the number of leads we want to acquire. In Camp Bow Wow, we look for about 3,000-plus leads per year and adjust the spending to the most productive lead sources. This may change during a year if we see a better or lower performance from any single type of lead source.”

Haavind shared that looking for prospects who have shown interest in multi-unit ownership can be more efficient in the long-term rather than budgeting a “per-unit” marketing spend.

As a franchisor builds out its strategy and budget, there are a few things to consider and practices to implement.

Stay conscious of approaches that have worked in the past. If there is a certain expo that has been very fruitful in previous years or a current franchise owner that has expressed interest in obtaining additional units, there is no shame in taking a proven route!

Building these sources into a budget and strategy ensures that the more trusty techniques are accounted for before branching out to additional approaches.

While tried and true sources are great, they should not be a franchisor's only strategy. Working to identify and budget for diversified lead sources can provide a bit of cushion and create space for new, unexpected sources to shine.

“Review lead performance often to determine when a change is needed,” Haavind said.

While there is something to be said for creating a plan and sticking with it, periodic performance reviews are a great way to stay in the loop and be conscious of when a change may be necessary. Try to find a healthy balance between adjusting a strategy too frequently and being so stubborn that there is no space to pivot.

Save time and money by simply being straightforward and realistic. Building a strategy and budget without a specific target or goal in mind is a poor practice to adopt.

Rather, spending just a bit of time identifying a target franchise owner — including financial requirements, cultural fit and long-term goals — can lead to a much more informed development strategy. Instead of drawing in any and everyone, franchisors can dedicate their funds and efforts to prospects most likely to be a great fit for the franchise network.

“Try new ideas or industry trends to test if they may work for your concept,” Haavind added.

Leaving a bit of space in the plan to embrace the most recent industry trends can help a franchisor determine whether a certain approach fits its concept. Test driving a trend while it's young can allow the franchisor to be one of the first adopters if it is a good fit, demonstrating innovation and leadership to prospects.