5 Franchisor Best Practices For COVID-19
by Brent Dowling, Raintree CEO

Before franchising, I came from the competitive snowboard world. That’s a career built on learning to make the right decisions, even when fear is at an extreme level. The right decision can mean victory & elation. The wrong decision can sometimes mean serious injury or even death.

But as I exited that world, I lost my love of fear and my ability to make the right decision, even in cases of high risk. Of course, I started a franchise development company and became a Franchisor, but honestly, neither of those decisions came with high risk. The need in the market for both those companies was clear. And so, since my snowboarding career ended, I’ve never really made any high-risk fear-driven decisions. 

Many of my closest friends today whom I snowboarded with, however, retained their excellent decision-making ability in the face of high risk. 

To cut some long stories short; my best mate started a snowboard glove company in 2010 when snowsports retail was dead – it’s now the biggest snowboard glove company in Australia. 

Another poured almost all of their snowboard earnings into Netflix in 2010 – when the stock price was $19. 

And yet another bought $40K worth of Bitcoin in 2013 – It was about $300 per BTC at the time.

And so for the last few years I’ve been wondering whether I’ve lost the ability to embrace risk, and make smart decisions despite extreme fear. I’ve told myself for a while – if you get scared in business – embrace it! It means you’re probably on the right track.

Enter COVID-19. And I’m scared…so now it’s time to get ready.

Here’s how you can too:

It’s pretty evident to everyone at Raintree that many franchise brands are now full of fear. 

In terms of franchise marketing keywords, Google and Facebook PPC cost-per-click (CPC) prices are falling quickly, but the search volumes have remained stable and even in some cases increased.

There are already far fewer brands active on franchise portals. Most franchise brands appear to perceive the shutdown of restaurants, bars, retail and the need for social distancing to directly correlate with a shutdown in franchise marketing and sales. Simply put, it looks like many franchise brands are scared – and rightfully so!

The result of this fear has undoubtedly created an uncrowded franchising marketing space.  

It’s OK to be scared. In fact, it’s good. It likely means there are opportunities here. 

But try to set it aside and make some logical decisions. I used to have to launch off 100-foot jumps for a living, and before I did, I would always take 5 very deep breaths. This would slow my heart rate, which in turn would reduce my anxiety and therefore physically allow me to be in a better position to make decisions and mental adjustments along the course.

So, take 5 very deep breaths now and then decide if you think some sort of normalcy will resume in the next 2-4 months. If you believe that to be true, then I think you should be brave and continue to invest in advertising your franchise opportunity. 

As fear takes over other brands’ decision-making processes in the coming days and weeks, the power of your active franchise marketing dollars will increase exponentially. Put yours aside and really assess the opportunity here.

Based on previous economic downtowns, the most notable being the 2008/2009 Global Financial Crisis, we are expecting to see a significant increase in the franchise buyer pool in the coming months. 

Unemployment and corporate layoffs are a breeding ground for a surge in potential franchise buyers, who become attracted to the idea of controlling their destiny through business ownership, with the support (and reduced risk) of a franchise behind them. 

As one small data point, at the first franchise company in 2009, we continued to advertise that year, in spite of the state of the economy. We awarded 5 franchises that year.

…We awarded over 100 franchises in 2010. 

The demand for franchise sales still exists, today. Again, search volumes for franchises on Google have stayed steady this week. Certainly, based on previous recessions and global economic disasters, we believe that demand is going to skyrocket once we start to see the COVID-19 curve flatten.

Having a pipeline already built, versus having to start from zero to build it will mean the difference between brands winning and losing at franchise sales in 2020.

The disparity in performance between experienced and inexperienced franchise salespeople is about to become more obvious than ever. In a climate of fear and the unknown, understanding buyer psychology and how to work with the variety of fears that most candidates will have is going to play a critical role for you in terms of deals being won and lost. 

At the very least, you want to encourage your candidates to move at their own pace. Over the next 1-2 months, you need to nurture & educate, rather than sell. Pushing any type of timelines or outcomes on candidates while we are in a complete state of the unknown could prove unwise. 

Your primary goal should be to keep your candidates active and engaged so that when the COVID-19 curve flattens, you have a pipeline full of candidates who will be in a strong position to move forward in buying a franchise. 

I’d also recommend that you ensure your salespeople understand the opportunities that lay ahead for fast-acting franchise buyers. Two of the most important being:

The first is the most obvious: Interest rates are at historic lows. Here are some talking points:

• Because of the COVID-19 scare, the Feds dropped prime to zero which has allowed all banks and credit unions to drop their unsecured interest rates as well. There will be the lowest interest rates we have seen in 10 years.
• With the prime rate being at zero the banks and credit unions are deploying as much capital as they can which means that approval rates should get much higher
• More banks will be looking for SBA loans to put on the books so the number of banks focused on this type of lending will increase
• Legislation being introduced to Congress by Marco Rubio, Chairman of the Small Business Committee. It is focused on the 7a Program. Some of the highlights are:
• Allow any 7(a) borrower to use the proceeds of the loan for payroll support, including paid sick leave.
• Waive all fees for all 7(a) loans for one year for both lenders and borrowers.
• Provide a 90 percent loan guarantee for all loans, no matter the size.

We do, however, expect a backlog in funding to come through, hence why you should prepare to fund your franchise marketing budget, without fee revenue for at least the next month. 

Unfortunately for many, we predict that there will be a significant increase in the number of independent (Mom & Pop) businesses that close over the coming month or two. Without the support of a franchise corporate team to help strategize and implement survival tactics, they won’t have the same ability to survive the months of social distancing, self-isolations, and quarantines.

This could quickly result in a shift to what we call a “tenant’s market”. Commercial real estate will become more widely available, with the cost of rent decreasing, Tenant Improvements (TI) increasing, all of which will result in new Franchise Owners being able to see a much faster return on investments than what we have seen over the last decade.

Again, while many franchise brands reduce their lead generation spends to zero, opportunities will only increase. 

As I Franchisor myself, I understand right now how it feels to see minimal revenue, with continued overhead – it sucks! You can, however, ensure you are in a good place to continue to sell franchises while reducing your cash burn. 

There are three types of franchise buyers in terms of lead generation: 

To reduce your risk, focus only on the HUNT MODE candidates to fill the top of your funnel. This means you should only be spending marketing dollars on SEO, Google PPC ads, Franchise Portals & Brokers. PR will help engage and keep prospects active, per the advice above. 

By turning off Youtube ads, Facebook ads, portals with a conversion of <2% conversion, and a number of other channels, we will reduce the budget for most brands by about 50-70%. 

But again, the power of that remaining 30-50% is going to increase by the day here, as other brands succumb to their fear and shut down franchise marketing. 

The advice here is to reduce your spend today to just the HUNT MODE channels. 

Then, as soon as you see the COVID-19 curve start to flatten, double-down on your lead generation spend. Franchise sales are going to get crazy shortly after that time! But begin the preparation on those campaigns now. This will put you months ahead of your franchise marketing competition. 

THE REAL RISK IS ALWAYS IN DOING NOTHING

Continuing to push forward with Development now can allow you to not only save your year in franchise sales but if the bounce-back is as quick as it was following the crash in 2008/2009, staying the course will allow you to quickly distance yourself from your competitors in terms of new franchise owners and market share. 

In our experience, it takes 60-90 days for a new lead generation campaign to optimize and mature, and from there, a 12 week sales cycle to close your first deal. This means that waiting for this virus to be completely under control will mean from that day, you will be up to 5-7 months away from your first closed deal. While in that time, your competitors who held steady may be capitalizing on the biggest pool of post-recession franchise buyers in the last 10 years.

Emerging brands need franchise fee revenue to survive. Even brands that are currently royalty-sufficient, may not be so with continued closings and a slow/halt in consumer spending. Shutting down your opportunity to sell franchises could really dictate the speed of your recovery, and unfortunately for some, that decision may be the nail in the coffin in a few months.

And while I don’t encourage this for you all, I for one will be doubling down on franchise lead generation in the next week or so. It’s risky to do that so early, but of course, I just want my own “Netflix” / “Bitcoin” success story to share with my mates when I see them next at the end of this year.