Franchise for sale: how the internet changed franchising


Franchise for sale: how the internet changed franchising

Few spheres have been left unchanged in the age of the internet, a medium whose impact perhaps exceeds that of even television. 

It has brought to an end monopolies by demolishing barriers to entry, transformed communications, rendered professions obsolete and created new fields, to name just a few of its seismic impacts.

Franchising is no different. The internet has matured as a medium, with 18 million people in the UK having access to broadband internet. How people research and find franchises, how franchisors market their franchise systems, how franchisors deliver training and support, and how companies conduct their business have all undergone significant transformations.

The internet has transformed the search for a franchise for sale in much the same way as it changed how we shop. Just as online shopping enabled us to negate the fraught, traffic-choked journey to and from the shopping centre, web classified listings have meant aspiring franchisees, at least in the preliminary stages, avoid travelling, often to distant locations, to franchise exhibitions.

Just as the online shopper can filter or order search results according to price, best match and so on, you can filter franchise opportunities according to franchise fee, sector or minimum investment, within moments.

Just as price comparison websites have armed consumers with the information to help them get the best offers and avoid the worst customer service, classified listing websites have made research a more efficient, streamlined process

It makes for a stark contrast to the exhibition experience, where some franchise seekers can frankly appear bewildered and aimless, laden with brochures and free keyrings, pens and sweets, many destined for the bin. You could meet the perfect exhibitor after several hours at the exhibition but, conscious only of your aching feet, grumbling stomach and the impending screening of the latest episode of Come Dine With Me, you might not realise it.

The ideal franchise might even be in a corner of the exhibition you don’t get round to. Or they might not be there at all; unlike FranchiseSales.co.uk, which features around 1,300 franchise systems, an exhibition hall can only pack in so many exhibitors.

The world’s largest franchise-for-sale marketplace is also free to use and accessible 24/7/365, while there are only a handful of franchise trade shows throughout the year, invariably located in London, Manchester and Birmingham and entailing transport and entrance costs.

There’s still significant merit in meeting franchisors and fellow franchise seekers face to face at exhibitions, but if you’re already equipped with a clear idea of which sectors might suit you, and which franchises you can afford and have a suitable territory available, you can conduct a targeted operation – a surgical strike to borrow military terminology – rather than an unstructured, laboured trudge around the entire exhibition.

Streamlined process

Above all, the internet’s power derives from how it has broadened access to information and to the means to disseminate it. Just as price comparison websites and forums have armed consumers with the information to help them get the best offers and avoid the worst customer service, classified listing websites have made research a more efficient, streamlined process.

Knowledge is power, and franchise seekers can unearth online a huge volume of relevant information, from a disparate range of sources, quickly and affordably (not everyone can afford a computer and internet subscription of course, but they’re pretty much becoming as much a fixture as the television). Prior to the internet, franchise seekers tended to source much of their information from the franchisors themselves, which obviously presented problems in terms of reliability.

How this informational asymmetry between an ‘expert’ and the layman has been transformed by the internet is discussed in Freakonomics, a bestselling book using economics and statistical analysis to subvert accepted truths, by the economist Steven D Levitt and author Stephen J Dubner. “We accept as a verity of capitalism that someone (usually an expert) knows more than someone else (usually a consumer),” they write.

“But information asymmetries are everywhere and in fact have been gravely wounded by the internet. Information is the currency of the internet. As a medium, the internet is brilliantly efficient at shifting information from the hands of those that have it into the hands of those who do not.”

Previously, franchise seekers might get a few pamphlets posted through the door, see the odd newspaper clipping. The really determined would visit an exhibition, cut out franchise opportunities from trade publications and buy franchise directories.

However, the trade directories would still only have perhaps maybe 150 opportunities to compare with a couple of paragraphs about each franchise, whereas online directories can have hundreds or thousands. In fact, there is virtually no limit to the volume of listings it can feature.

What’s more, you can zero in on any particular category or brochure within a couple of mouse clicks and/or key presses. Pre-internet, wrote Levitt and Dubner, information was “woefully scattered”, whereas “the internet acts like a giant horseshoe magnet waved over an endless sea of haystacks, plucking the needle out of each one. The internet has accomplished what even the most fervent consumer advocates usually cannot: it has vastly shrunk the gap between the experts and the public.”

They refer to situations where “an expert can use his informational advantage” not just to help us (for a hefty fee), “but to make us feel stupid or rushed or cheap or ignoble.” They cite the theoretical example of a slick car salesman obscuring a “car’s base price under a mountain of add-ons and incentives.

Later, in the cool-headed calm of your home, you can use the internet to find out exactly how much the dealer paid the manufacturer for that car.” For car salesman read pushy franchisor at an exhibition.

Empowered

Just as it has for people with niche interests, those who organise protest movements and – admittedly with more powerful consequences – those living under repressive regimes with heavily censored media, the internet has empowered the franchise seeker.

The search ‘franchise forums’ yields the following items on Google search results: “Legal action against franchise in Macclesfield” [4 posts], franchise dispute (three posts) and a 10-post exchange about a vending machine franchise, criticised variously because of faulty machines and  the franchisor being ‘a waste of space’.

Franchise seekers who’ve wisely conducted preliminary research online will, in theory, arrive at exhibitions more inured to slick sales tactics, the currency of which is often misinformation. This stage is then all about the human dimension.

Having researched all other factors, it’s now about whether the franchise seeker can establish a rapport with the franchisor – is this somebody they like, are they trustworthy, can they work with them day in, day out?  

Of course, though, the internet hasn’t obliterated all informational asymmetries - otherwise accountants, solicitors and other professionals would be out of jobs. And only virtuous franchisors attract franchisees and incompetent or unscrupulous franchises would be uniformly shunned. Information on the web, though voluminous and easy to filter, is less than comprehensive, not always reliable, and you need the skills to sieve, compare and interpret it.

The aforementioned, hypothetical franchise seeker we’ve referred to arrives at an exhibition armed with information, yes, but, unless they’ve delved beyond the first page of Google results, often the provenance of said information is mostly from the franchisor themselves anyway. Some, especially older people, won’t use the internet at all.

Franchising is not the same as term life insurance, which is an almost homogenous product. A huge part of the research process is meeting people involved with the company, most importantly perhaps, the franchisees themselves. It’s their anecdotal experiences that give you a true feeling of what running that franchise is like.

Profit figures, potential income, promises of low overheads – nothing in a brochure can be decisive in making you take such as decisive step than speaking to someone who’s been there and done it.
The web has also amplified the voice of the consumer and citizen, for both good and ill.

Social media

Now social media, most notably Twitter and Facebook, can mobilise, amplify and accelerate a protest as never before. Distaste for the behaviour of a company, celebrity or whatever can now rapidly snowball with astonishing rapidity, prompting coverage in conventional media, because now we have chat rooms, message boards, text messaging and e-mail, where hitherto there might have been the odd letter sent to a newspaper or phone call to a radio station.

The furore over Jan Moir’s column about the death of Boyzone star Stephen Gateley, which insinuated his death, adjudged to be of natural causes by the coroner, was somehow connected to Gately’s sexual preferences and cannabis-smoking, was an instructive case study. Stephen Fry whipped his one million plus followers into such a storm of protest that the Press Complaints Commission website crashed from the sheer number of complaints.

Before the internet the people who complained were determined characters; most people couldn’t be bothered to write and post a letter or wait on hold to call a radio station or customer service centre. Now it’s so easy to register your feelings, so that you may do so even if only mildly irritated.

What’s more, the internet affords an anonymity for the vindictive, immature and downright demented to express their prejudice behind. The vitriol in the comments that follow online articles betrays a shocking hatred and prejudice that they would doubtless not vent in real-world interaction.

If the internet has democratised the dissemination of and access to information, then as well as empowering people to make the right choices, it can also leave them susceptible to scams. One only has to look at the profusion of spam, where emails purport to be from Nigerian or Russian businessmen, promising huge returns in exchange for an advance fee, or the countless work-from-home scams. There will always be gullible people, unfortunately, and the internet has made it vastly easier and cheaper for scammers to reach them.

Misinformation

Forums are very much vulnerable to abuse. If information is the currency of the internet, as Levitt and Dubner contend, then misinformation is the forged cash. It wouldn’t be difficult for unscrupulous franchisors, for example, to counter legitimate complaints about their business with bogus profiles purporting to be satisfied franchisees or customers.

Conversely,  embittered former employees and franchisees can damage the reputation of companies through malicious lies. An embittered former lover could parade online as a franchisee and bad-mouth the company to wreak revenge on its founder.

It could be someone who is just bored. Either way, there’s no filter; every anonymous poster carries an equal weight no matter what their actual qualifications, knowledge or sincerity.

Franchisors should have nothing to fear from the web though. Constructive criticisms can help the company know where it’s going wrong and address its problems.

And it can conduct market research for free by visiting forums where it is mentioned, as well as by using Google search, Google News, Google Blogs and social media-orientated search engines. Unhappy customers can be responded to, compensated and won over through goodwill gestures.

Fortunately, most people recognise the difference between a lone voice complaining, however vociferously (although a really determined character could inhabit any number of online guises), and an epidemic of complaints. Franchisors can mount counter offensives, mobilising their franchisees and clients to dismantle unwarranted criticisms on blogs, forums, chatrooms and social networks.

The effect of the internet on the franchise-buying process is two-way; if franchisees find it easier to research the franchise marketplace, then equally, franchisors have an easier time identifying suitable candidates (find out how franchisees are chosen). Hitherto, they would target franchisees in the largely scattergun fashion that old media allowed.

Radio and television ads could be shoehorned into ad breaks between programmes with the right demographic, but television advertising in particular was beyond the budget of all but the wealthiest companies. More common were adverts in trade publications, local press and classified newspapers, and pamphlets posted through doors, all of which seem now particularly inefficient.

The beauty of the web is that instead of proactively targeting a vast number of largely disinterested individuals, the genuinely interested franchisees find them. It’s the franchisees that are proactive, not the franchisors. There are so many platforms to promote a franchise opportunity nowadays.

Previously, it was difficult to get catch a journalist’s attention with a press release, and it still is, but there’s a greater range of outlets which can pick up your story online, including sites like PR Newswire which will post every release you send verbatim.

Google rankings

Now by optimising their website for key terms franchise seekers use – harnessing the science of ‘search-engine optimisation’ – better than their competitors’, franchisors can gain an edge in the Google rankings without having to resort to sponsored links.

Any company can get a slick looking website nowadays for a reasonable fee. Production and mailing costs have been reduced, as there’s less need for direct mail. Marketing videos and podcasts with professional production values are now commercially viable for franchisors across the spectrum.

All of which makes things easier for fledgling franchises with meagre budgets, something which the profusion of smaller franchisors attests to. Advertising in broad-reach publications has always been the sole preserve of major franchisors, but such ad space no longer holds the same cachet.

The internet has undoubtedly levelled the playing field. Promotional videos and podcasts with professional production values are also now commercially viable for franchisors across the spectrum.

The flexible marketing offered by the world’s leading franchises for sale classified listings service, FranchiseSales.com, also helps. Smaller franchisors which recruit comparatively small numbers of franchises or generally put on a pay-per-lead package, meaning they only pay a modest fee when they get pre-qualified, high quality leads.

Again, though, the feature of internet usage that has so helped the franchise buying process, namely the sheer convenience and speed of engaging on the web, is also at the root of a key problem for franchisors: the quality of leads. Clicking through brochures and filling in online forms is so easy that it’s tempting for franchise seekers to adopt a scattergun approach, requesting brochures from countless franchises, many of which they might only have a mild interest in.

Someone navigating franchise opportunities on the web at home hasn’t expended much time, effort or money, so is rather less likely to be a serious buyer than someone who has rang the company, written a letter or paid for an exhibition ticket and travelled several miles to reach a trade show. Therefore one of franchisors’ chief gripes about web advertising is that, while the volume of leads can be very high, most of them can be of poor quality, often useless.

This is all the more galling when the franchisor pays for each lead. FranchiseSales.com has successfully addressed this concern through its pure qualification system, which filters out timewasters and unsuitable candidates with a series of pre-qualification questions, which are formulated in conjunction with the franchisor.

Of the franchisees deemed to represent worthwhile leads, further differentiation still can be made. For example, a franchisee who has declared an interest in buying two units within three months, and who comfortably meets the financial criteria, might be accorded a higher priority than a candidate with more meagre financial needs who is pursuing a single unit but is happy to wait a year.

It’s up to the franchisor, but either way FranchiseSales.com has the information to hand to make an informed judgment about the allocation of resources. It is this more nuanced approach to lead management which has accounted for improvements in lead management in recent years.

The classifieds website has also sounded the death knell for the printed classifieds publication. Daltons, a 100-year-old brand, has been shrinking in circulation and in page numbers, and the company has belatedly migrated resources to its online counterpart.

There are still good reasons for reading news in print rather than online, but no argument for scouring for goods for sale or business opportunities in such a format. Even if a weekly classifieds paper could index the entire universe of franchise opportunities, information would be perfunctory and scanning them laborious to say the least, and no updates can be made until the next edition, unlike websites, which can be updated at any point.

Intranets

The internet’s impact extends beyond how franchisees and franchisors find each other. It’s also becoming ever more useful as a support and training tool, as well as a platform for communication between not only franchisees and franchisors, but between franchisees themselves. Most franchisors now have an intranet, a website which only people in the organisation can access.

As well as storing operation and training manuals and, increasingly, training videos, podcasts and other remote media, the intranet increasingly has social networking functions, so franchisees and head office staff can share best practice and deal with any issues through chat rooms, webinars and other real-time communication tools.

Through the intranet, franchisees have access to some sort of real-time support and training 24 hours a day. This wasn’t previously the case, when the principle communication mediums were telephone, in person or post.

Also, pre-internet, minor adjustments to the operations manual had to be delivered by overnight mail, with revisions perhaps coming in separate sheets; it simply wasn’t practical to print and dispatch a new operations manual every time a slight change was implemented. The internet enabled changes to be communicated instantly via email, or the changes could be incorporated seamlessly into the online version of the manual.

So revolutionary, such a revelation in the world of business is the internet, however, that there’s a temptation to overlook its shortcomings, and a danger of overreliance. The intranet can help franchisees feel more supported, less isolated, and foster bonds between the network – but only if it’s used as complementary to traditional, real-world meetings, rather than a substitute. Otherwise it can have the opposite effect.

The internet cannot build trust between franchisee and franchisor in the way that face-to-face meetings, including both business-orientated meetings and informal social events, can. So effective and so cost-effective is an intranet, however, that some franchisors could be tempted to strip head office down to the bare minimum to cut costs, especially in tough economic times like we’re seeing now. They’ll still need physical support and training.

Yes, the internet can perform certain things more cheaply and effectively, for example common troubleshooting questions hosted on the web can reduce the volume of calls to head office. But if you’re a printing franchise and several of your printers are broken then they can’t be fixed by the internet.

Internet franchises

For some franchises, the internet doesn’t just cut costs and improve efficiency – it underpins the entire business model. Ecommerce businesses, web marketers, internet consultants, web-based travel sites, B2B web directories, community websites and eBay-related franchises are a few of the types of online franchise opportunities available now.

They prove popular with franchise seekers for two reasons. First, the market.

Attracted by the convenience and greater cost-effectiveness, customers and businesses alike, growing numbers of consumers and businesses are buying their goods and services online, and this upward trajectory is inexorable. The second reason is that an online business is often less demanding in terms of both time and cost.

The initial price and ongoing overheads tend to be lower because premises and retail staff aren’t needed, while a website can automate much of the sales and customer service function. This means a franchisee can leave the business unattended for longer periods, meaning more holidays and more flexible, shorter hours.

Allied to the fact that they can work from home, such benefits have seen a remarkable rise in people with young children buying franchises. Even more unthinkable a generation ago, is the number of people running online franchises as well as holding down part-time jobs. Considerably less demanding financially and in terms of time, internet franchises have broadened access to entrepreneurialism more than any government incentives or grants.

It’s amazing how quickly you get used to new inventions – for example, how did people meet up with one another before we all owned mobile phones? Similarly, we’re now so accustomed to using Google that it’s easy to forget just how scattered, piecemeal and difficult to gather information was.

Libraries housed works of literature, biographies or academic books about history, geography and science. They didn’t tend to give you the latest, up to date information on fast food franchises or automotive franchises.

It’s impossible to overstate the impact of the internet on so many aspects of franchising, from how franchisors find franchisees and vice versa, to the support and training provided to franchisees when they’re up and running.

 

About The Author

Adam Bannister 
Adam Bannister writes for all titles in the Dynamis stable including BusinessesForSale.com, FranchiseSales.com and PropertySales.com as well as other industry publications.