Do you keep core operations in-house or outsource them? Regardless of size or industry, it’s a question that organizations face with respect to a number of business processes: marketing, accounting, human resources, legal and sales.
For an emerging franchisor whose primary focus is growth by awarding franchise agreements to qualified operators, one of the most important questions they must answer is whether to hire an internal or external franchise sales team. After all, the initial group of franchisees you bring into your system will set the tone for how your brand is forged in new markets among customers and future franchise prospects alike.
And there is no shortage of options to hire an external sales team. There is a multitude of franchise brokers staffed by salespeople who work on behalf of multiple brands to generate leads. There are dedicated franchise sales outsourcing organizations that take care of the sales process from start to finish. And there are also franchise consultants who typically offer a wide range of services, including franchise sales support.
With that in mind, here are several pros and cons of keeping franchise sales in house and working with an external sales team.
Building an Internal Franchise Sales Team
Inherent in the process of building an internal sales team is recruiting and hiring franchise sales professionals to represent your brand. A significant advantage this affords emerging franchisors is the ability to hire individuals who not only have a proven track record of success in franchise sales, but also have a vested interest in your brand and industry. An internal hire will be devoted entirely to your brand, making it easier to find individuals who align well with your mission and values.
- Greater Insight into the Sales Process
Emerging franchisors come from a wide variety of backgrounds and not all have a deep understanding of the franchise sales process. Building an internal team not only allows the franchisor to hire strong sales leaders who are aligned with the brand and understand how to sell, but it also allows them to see how the process works. Those unfamiliar with franchise development may have unrealistic expectations when it comes to lead flow and time needed to close a deal. Building an in-house team provides that sort of hands-on exposure and ultimately provides a necessary education.
In many cases, emerging franchisors choose to tackle franchise sales on their own. Founders and those intimately involved in the brand from the outset will often have the clearest understanding of the cultural values they wish to see propagated throughout the franchise system. The training programs they develop for their sales team will reflect those values and instill them in their team. Prospective franchisees may be hesitant about joining an emerging brand without many other franchise owners to rely on for validation and may be more likely to respond well by having direct access to an internal sales team or even the founder, depending on the circumstances.
Part and parcel of building an internal franchise sales team is the recruiting and hiring process, which is challenging regardless of experience and economic climate. You may need to devote your own time and resources into creating ads, seeking referrals and screening individuals for a role on the team. Or you might work with a recruiter or hire human resources professionals to tackle the task, both of which require additional financial resources and patience in finding the right person for the job.
- Additional Member of the Payroll
In the early, lean times as an emerging franchise brand, most of your focus is likely on growing the brand by awarding franchise agreements. So, additional expenses like a franchise sales team’s salary and benefits may come as a shock – depending on the level of experience you’re seeking in a new hire. While commission rates are typically lower, annual compensation is something that emerging franchisors have to consider when bringing on an internal sales team.
- Risk of Underperformance or Quitting
An emerging franchise brand built for growth will have developed a robust training and operations manual for new franchisees, but might not have dedicated as many resources to training for a franchise sales team. If you’re hiring more for cultural fit and bring aboard individuals who may not have extensive experience, it will take longer for them to reach peak performance levels – or they may never reach expectations. More experienced and successful franchise salespeople may have lingering doubts about your brand’s ability to achieve sales projections, which ultimately impacts their income and they may quit for a more mature brand. In both cases, you’re left in a precarious situation having to take over franchise sales in the interim as you search for a new member of your franchise development team.
Hiring an External Franchise Sales Team
The clearest added benefit of working with an external sales team is that it frees you up to focus on the health of your emerging franchise system and ensuring operational success at the unit level. Franchise sales outsourcing organizations, for example, will take care of everything involved in the process short of lead generation, meaning they’ll handle inquiries, score leads, nurture them and go through important documents. At the same time, you won’t have to devote time and resources to recruiting, hiring and training.
External franchise sales teams typically earn income solely from the commission when awarding a new franchisee. Franchise brokers who you may use for lead generation are paid when a lead they generate closes, and a franchise salesperson also earns commission for closing the lead. In the case that you were to use both for franchise sales, you’re still likely saving money since you’re not responsible for paying a monthly salary and benefits, as well as investing in training opportunities, for an internal hire. However, if the lead flow and the number of deals you close through an external salesperson reaches a certain point, you may end up spending more externally and decide to bring sales in house.
Most external franchise sales professionals and organizations are experienced in both the franchise industry and sales process. Outsourcing and consulting companies run deep with talent so that even if there’s turnover, it doesn’t impact your emerging brand’s growth to the degree that internal turnover does. At the same time, there are more layers of talent with most outsourced franchise sales organizations, so it’s easier to make the shift in how aggressive your emerging brand is when it comes to growing your system.
The big trade-off with respect to payments when working with an external franchise sales team is the amount you’ll dole out in commission. Since you’re only paying for franchise agreements that are awarded, this is the only way the external team earns an income, although some may also charge a nominal monthly management fee. An internal franchise sales team member will typically augment their regular salary with a commission from new sales, so they’re comparatively lower. Depending on how quickly an emerging brand scales their sales strategy through an external franchise sales team, it may be worth looking at the investment side-by-side with building an internal team.
Because an outside sales team isn’t an employee of your brand and works offsite, it’s harder to be sure of the practices employed and just how much time they’re devoting to your franchise brand. Most reputable organizations will be in close contact with the franchisor, as a positive relationship is mutually beneficial. However, the onus may be stronger on the part of the emerging brand to keep lines of communication open so everyone’s on the same page.
- Alignment on Qualified Candidates
Although an external franchise sales team may be well-versed in the franchise industry and helping brands award franchise agreements, outsourced salespeople probably haven’t internalized your brand’s culture, values and mission to the degree that enables them to identify candidates that will be prime candidates for your first few franchisees. Similarly, they may not have sufficient expertise in your industry to effectively answer all prospects’ questions about the franchise opportunity.
For help formulating a franchise development strategy for your emerging franchise brand, turn to Winmark Franchise Partners. With 30 years of franchising experience and more than 800 franchise owners representing over 1,225 locations for five brands, Winmark Franchise Partners can help grow your brand through sound strategy and expert franchising advice. Contact us here or at (844) 234-8520.