How does franchise lead generation work?

If you’re considering a franchise opportunity, one of the first questions you might have is how franchise lead generation works and whether the franchisor will help you find customers.

Whether a franchisor will actively generate customers for you varies by franchise. Vicky Wilkes, head of legal at Aston Villa Football Club, explains: “Some franchisors will provide potential customer lists to their franchisees, leaving the conversion of a potential customer into an actual one to the individual franchisee. Other franchise concepts require franchisees to rely more on advertising, good customer service and word of mouth to generate custom.”

In most cases, franchisors charge an advertising or marketing fee to carry out marketing across the network. They usually calculate this as a percentage of the franchisee’s turnover.

Wilkes adds: “It’s usual for the franchisor to hold this money in a separate account and make audited records. These show how they’ve applied the money and are available for franchisees to look at.”

If you want to do your own marketing beyond what the franchisor provides, this generally requires pre-approval. It will also be at your own expense.

So will a franchisor find customers for me?

Many prospective franchisees assume franchisors will hand leads to them, but this isn’t always the case. John Pratt, senior partner at Hamilton Pratt, clarifies: “The majority of franchises do require franchisees to sell. Very few franchise businesses can simply rely on leads being provided to them.”

Pratt notes that some franchise agreements include national or regional accounts that the franchisor secures, which one or more franchisees then perform.

However, he warns: “Usually, these contracts are less profitable for franchisees than contracts they obtain themselves. The reason for this is that large customers will generally seek to obtain better terms than smaller ones.”

In general, a franchisor will expect you to find your own customers. As Pratt says, “That’s why franchisors appoint franchisees, because franchisees are local, know their local market and it’s much easier for them to find customers in their allocated territory than it is for the franchisor.”

How are sales leads distributed among franchisees?

When it comes to enquiries or leads, franchisors usually have a system for distributing them across their network.

Brian Duckett, former chairman of The Franchising Centre, explains: “Generally speaking, a lead will be allocated to whichever franchisee covers the area of responsibility in which the enquirer is based.

“A simple check of the postcode will establish this. The details will be emailed or phoned through to the franchisee or even automatically flagged up on the franchise management software used by the network.”

Duckett points out that in some cases, lead allocation can be more sophisticated. For example, if the enquiry requires specific skills or falls outside a standard territory, it may be directed accordingly.

When establishing trading territories, franchisors often consider population size, demographic profiles, types of homes or even the number of households with gardens or pets.

By mapping out potential territories, franchisors can ensure franchisees have enough potential customers to meet their targets.

Key takeaways

When exploring a franchise opportunity, it’s important to understand:

● Franchisors may support marketing aimed at franchise lead generation, but individual customer acquisition often falls to the franchisee.

● Leads, if provided, are usually allocated based on territory or specific requirements, not randomly.

● Relying solely on franchisor-provided customers can limit your growth and profit potential. Local knowledge and proactive selling are crucial.

Understanding these points before signing a franchise agreement can help set realistic expectations and prepare you for success as a franchisee.