Periscope Broadcasts 200 Million Streams in Year One

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. While a recent FTC settlement may represent some movement in the right direction, the industry at large needs a reset.

Franchise sales model issues

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.

• At ROS, Coley and his team will work with any brand, and even tie their compensation to the performance of the franchisees over five, 10 or 15 years.

Industry change needed

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.

• Coley believes that his proven system can help franchisors achieve meaningful changes in the industry, and is fulfilling to see his ideas put into practice.

Nick Powills, 1851 Franchise Publisher, joined Coley 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.

Benchmark numbers criticism

Powills expressed frustration with the industry's reliance on benchmark numbers, such as the $13,000 cost per deal and the 1% deal-to-lead rate. He believes that these numbers are often misleading and do not reflect the specific needs of individual brands.

• Coley agrees with Powills, stating that the industry data can be misleading and that franchisors should focus on their own data and strategies rather than relying on industry averages.

Coley believes that the industry's reliance on benchmark numbers is a result of people not knowing their own data and being hungry for any information that can help them achieve their goals. He advocates for a more transparent approach to franchising, where franchisors prioritize the success of their franchisees over short-term gains.

• Coley highlights the importance of aligning expectations with reality, and believes that franchisors must be willing to confront the uncomfortable truths of their industry in order to achieve success.

Powills notes that the industry's focus on signing franchise agreements and getting units opened is misguided, and that the true value of franchising lies in building successful businesses. He believes that franchisors must prioritize the long-term success of their franchisees over short-term gains.

• Coley agrees with Powills, stating that the industry's focus on short-term gains is a result of people not understanding the true value of franchising.