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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, emphasizes the need for transparency and a focus on long-term franchisee success. He created the Recruitment Operating System, a framework to help franchisors optimize their development efforts and reduce reliance on broker networks or lead generation agencies. Coley bases his strategies on the principle that a great business model is only as strong as the recruitment system behind it.

A strong recruitment system must prioritize transparency, unit-level profitability, and strategies that align with long-term franchisee success. Coley advocates for a focus on scalability, durability, and wealth generation for both franchisors and franchisees. At ROS, they tie their compensation to the performance of franchisees over five, 10, or 15 years, and provide manual systems and analytics for lead generation, appointment setting, sales, and onboarding.

Reclaiming the potential of the industry requires development leaders to confront the uncomfortable realities of how franchising has changed. Coley highlights the need to address hidden broker kickbacks and financial models that make ownership inaccessible for hopeful entrepreneurs. He notes that more people than ever are actively choosing franchising, and there are still many franchisors who truly care about the success of their franchisees.

Coley emphasizes the importance of examining operational factors that influence franchisee interest, rather than relying on sweeping industry averages. He notes that the industry average for deal-to-lead rate is now 25 basis points, and that this can lead to unrealistic expectations and a focus on signing rather than recruiting. He argues that this can result in a lack of transparency and harm to the entire industry.

• Industry benchmarks, such as the 1% rule, can be misleading and create unrealistic expectations.
• The cost per lead and cost per deal can vary significantly depending on the brand and its specific circumstances.
• A strong recruitment system must prioritize transparency, unit-level profitability, and long-term franchisee success.
• The industry needs to address the issue of hidden broker kickbacks and financial models that make ownership inaccessible.
• More people than ever are actively choosing franchising, and there are still many franchisors who truly care about the success of their franchisees.