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Growing Your Business with Referrals
May 2007 Franchising World
Existing franchisees are an important source of tomorrow’s franchisees in your system. There comes a time for every franchise system when it has to decide if it wants to grow for the sake of growth or it wants to grow in the name of quality, service and innovation. For those who choose the latter, several hurdles exist. Competing with the many franchise companies out there is not an easy task, neither is determining which potential franchisees are good candidates to help strengthen the brand and enhance the bottom line. Generally, good growth is better looked upon and yields better and more consistent long-term results. Often when a system is looking to expand a franchising business, it tries to reach people through direct mailings, e-mails, brokers and participating at trade shows. While these are very valuable tools ––tools which a system should continue to use to increase its pipeline––there is another tactic that must be considered. Why not tap into the resources already at the franchise system’s disposal? Current franchise owners are walking examples of how the franchise organization helps anyone achieve success.
Why use referrals?
How do you ask for referrals? • Satisfied, profitable franchisees. Do system franchisees fall into this category? Are these individuals happy with the choice they made? Do they proudly tout their business, the franchised business’s name? They must feel comfortable and secure in their business. They must be willing to share their story because they feel that business acquaintances and friends—referrals—would also succeed. Individuals such as these are the perfect candidates for assisting to expand a stronger, more profitable business. If the above scenario does not describe current franchisees, one has to ask a few questions. Why not? Are there areas where they are struggling? How can the franchise system help? What can the franchise company do to help their business succeed? This is the chance to find out where the system may be lacking and improve upon it to better the business for current and prospective franchisees. Once the company has improved in these areas, it’ll see a surge in the number of franchisees willing to send in referrals. • Educate franchisees on the value of system growth. Why should franchisees help expand the system? The answer is simple: more franchises, more sales and more power in the marketplace equal more success for everyone. What this means for a franchisee is greater name recognition and a path to greater market share for individual businesses; what it means for the franchise organization is a stronger brand and more franchisees signing on. All parties benefit from this situation. Once franchisees see what’s in it for them, and the efforts the organization is making to ensure that they and fellow franchisees succeed, everyone will benefit. • Have a reward system in place. It’s important to remember that a franchisee’s time is valuable. More importantly, make sure franchisees see that the brand recognizes the value of their time. While gaining referrals may seem like the most important thing to the franchise system, franchisees may be struggling to retain employees or are behind on placing orders, things that directly affect their livelihood. That means the job is to convince franchisees that taking a few extra minutes to help is going to be worth it to them. How? Motivate them with a reward. Who wouldn’t want an all-expense paid trip to somewhere warm and inviting? The best motivational rewards are those that franchisees wouldn’t necessarily splurge on for themselves. There are rewards that come with prestige and make lasting memories, rather than something that is placed on a bookshelf unlikely to be appreciated or seen for very long. Another excellent way to motivate franchisees is to reward them monetarily. At this company, once a franchisee’s referral becomes an owner, he receives a cash reward. If two referrals become owners in a calendar year, the franchisee receives cash bonuses and an all-expense paid trip for two. This tactic has proved enormously successful with 40 percent of all new owners coming from referrals and 10 percent of those referrals becoming franchise owners. If a gift is preferred, think more along the lines of items that people are going to see and comment on. For example, flat screen TVs, digital cameras and sound systems. These are items that will be noticed in the office or the home and will make an excellent segue for franchisees to talk about their businesses. Just be sure that the reward offered is not for simply submitting a referral name, as this would be cost prohibitive. Another important aspect is to educate franchisees not only on product lines, but to make sure that they understand how valuable it is for the entire system to grow. When one franchisee is profitable and successful, everyone benefits. When several franchisees are profitable and successful that’s when the true value can be seen.
The corporate office has the referral names, now what? • Franchisees sending in referrals will understand the process and know that the company is taking their referrals seriously. This will also give them the chance to follow the process and keep in touch with the referral to determine their continued interest. • Internal departments must be held accountable for these referrals. It’s imperative that everyone is on the same page so that referral names are always followed up with phone calls, direct mail and literature. Remember, referrals should be treated as seriously, if not more so, than any prospective franchisee. • Fast action on the part of the franchise development department will provide the best chance at gaining and maintaining the interest of referrals. Don’t wait weeks to contact these individuals. The best opportunity lies in swift follow up.
The Drawbacks of Referrals
A Final Word Productive franchisees have a profound impact on the franchise business, expanding the system of quality, service and innovation. Current franchisees are individuals that the franchise system has strong relationships with and they are keys to enlarging the business with stronger franchisees. Don’t miss out on this opportunity. Gregory Muzzillo, CFE, is founder and co-CEO of Proforma. He can be reached at greg@proforma.com.
By Gregory Muzzillo,CFE
Referrals are a proven resource for growing a business. Leveraging franchisees is crucial because they can relate to prospective franchisees. They’ve been in those shoes. They understand that starting a business is a scary prospect. They know the questions they had about the particular franchise and have found satisfactory answers. They’re also been able to attest to the strength of the model, system and support. This testimony is truly what can help sell more franchises that are more profitable. It is also a proven method for strengthening the brand.
There are three keys for success when asking for referrals:
Before launching a referral program, it’s imperative that a system is in place to handle the volume of referrals. Set forth a clear policy detailing the timeline of the referral process to the franchise development department and share that outline with franchisees. This process is beneficial for three reasons:
From time to time, the franchise system is bound to receive the names of individuals who are not seriously interested in buying a franchise. While this is frustrating, be sure that everyone speaking with these individuals is courteous and understanding. Remember, the contacts are likely family, friends and business acquaintances of the franchisees. Franchisees expect that no matter what the outcome of their referral, their relationship with those contacts will not be jeopardized. A negative encounter with a referral can end up damaging the brand in the end not only in reputation, but also in the renewal of the current franchisee.
Referrals will likely be more qualified and interested in a franchise opportunity than leads from other sources. Remember, referrals have had a positive experience with one of the system’s franchisees. They may be current or past clients. They may be family members or close friends. But, no matter who they are, they are an excellent opportunity to expand the business.
