February Franchise Finance Index Shows Steady Growth Across Franchising

The traditional franchise sales model is failing. Brands prioritize short-term success in the form of unit signings and franchise fee collections. Bloated — and undisclosed — broker fees leave them low on funds to support the small business owners they’ve just signed.

Development teams accept sweeping industry averages, like a $13,000 cost per lead or a 1% deal-to-lead rate, rather than looking at the reality of their own system and examining the operational factors that could be influencing franchisee interest. Closing a deal has become the goal, not signing, onboarding and supporting a right-fit owner who will truly be successful in the system, and this pushes a lack of transparency that harms the entire industry.

Art Coley, CEO of CGI Franchise and the ROS Framework, said, “We’ve got to be willing to get honest, even if that means a headline or news gets out that isn’t pretty.” Coley is the creator of the Recruitment Operating System, a framework developed to help franchisors optimize their own development efforts rather than relying on broker networks or lead generation agencies. With over 30 years of experience in the franchise industry, Coley bases his strategies on one enduring principle: a great business model is only as strong as the recruitment system behind it.

A strong recruitment system, though, must have the right priorities. Coley advocates for transparency, attention to unit-level profitability and recruitment strategies that are aligned with long-term franchisee success. He said, “At ROS, we'll talk with any brand. We will even tie our compensation to the performance of your franchisees over five, 10 or 15 years.” Coley emphasized that his model is focused on scalability, durability and wealth generation for franchisors and franchisees.

Reclaiming the potential of the industry requires development leaders to confront the uncomfortable realities of how franchising has changed, from hidden broker kickbacks to financial models that make ownership increasingly inaccessible for hopeful entrepreneurs. Coley highlights that more people than ever are actively choosing franchising, and there are still many franchisors who truly care about the success of their franchisees. He said, “Personally, I feel like I'm finally getting the opportunity to make meaningful changes in our industry, which is very fulfilling.”

• Industry benchmarks are often misleading and based on sweeping averages.
• Development teams should focus on unit-level economics rather than relying on industry data.
• A strong recruitment system should prioritize transparency, unit-level profitability, and long-term franchisee success.
• Franchisors should be cautious of hidden broker kickbacks and financial models that make ownership inaccessible.
• Development leaders should confront the uncomfortable realities of how franchising has changed and prioritize the success of their franchisees.

Coley joined 1851 Franchise Publisher Nick Powills to discuss industry benchmarks, capital influence, the current state of development channels, and what it will take to bring the industry back to the supportive, small-business-owner-focused model that early franchisors envisioned.