Why is it so hard to sell to franchised brands?
Three words: unpredictability, inconsistency, uncertainty
Food franchises account for an estimated 30% of all franchise businesses in the U.S., and nearly 60% of the direct employment by franchises. And these figures don’t even include food-related franchises that are categorized as retail instead of a quick service or full service restaurant. FranchiseDirect shares a breakdown of each type of franchise here.
Franchising is a great option for those looking to break into the restaurant industry. Because of the already established brand equity and reputation, running one or many restaurant units that already have a loyal following can allow a franchisee to capitalize on the recognition factor and breeze past some of the common challenges that come with starting your own company.
Additionally, a parent entity can provide guidance to varying degrees, sometimes mandating use of certain vendors or equipment needed to run the franchise well. At their most involved, parent companies can establish their own built-in support network and have the power to ‘require’ business to be run according to a strict franchise agreement. Others, who perhaps are more hands off and want to just stick to menu management, may ‘recommend’ products and services across each franchised business but will ultimately allow operators to choose things like what inventory management or payment processing provider is best for their business. Before we dive into how reps can sell to franchised brands, here’s a quick review of what each position in the franchise hierarchy actually entails:
Parent company: The entity responsible for trademarks and business strategies for a restaurant concept that also provides support to franchisees.
Franchise: Where a parent company with an established or existing concept grants other operators the right to use the company’s trademarks and business strategies in exchange for a fee.
Franchisor: The owner of the parent company, trademarks, and/or products. The franchisor grants licenses for franchisees to operate their own businesses.
Franchisee: A business owner who pays a fee to a franchisor to license a parent company’s trademarked concept at one or all locations.
Unfortunately, as someone selling into the restaurant space, this often means you are connecting with franchise operators who may not fully understand a restaurant’s modern tech stack, and generally aren’t the most business-savvy. They also might not have any buying power.
The Challenges with Selling to Franchised Brands
Brands don’t typically open up a franchise model unless they have locations in the double or triple-digits. This would assume that selling to a franchisee would require the DNA of an enterprise sales rep, right? Wrong.
Each restaurant business is heavily nuanced, making it too difficult to have the same strategy for every brand with a franchise model. For instance, just because Nothing Bundt Cakes is a corporate and franchise-owned brand with over 400 locations, doesn’t mean you should have your enterprise reps tackle full-brand acquisition in your selling strategy. This top-down approach would require your costly enterprise reps to chase the indy space. If they focus on the small franchises to get the foot in the door they’ll likely miss quota.
For perspective, there are 33 enterprise brands that each have 1,000 or more units, where almost all of them are 90% or higher owned by franchisees.
2. The red tape conundrum
Having SDRs call individual stores is time consuming. You start by having a dozen different reps pitch products that are the most opportunistic to them at the time, which leads to a scrambled approach to selling, followed by inconsistent pricing being communicated to any given franchisee. Add on the complexities that make up a brand’s unique franchise model to produce a perfect storm of ineffective sales.
Franchised brands enter into this business under the premise that every operational aspect will be turnkey, from staffing to aesthetics. The reality is that these expectations are often met with golden handcuffs. Typically, a portion of franchise sales must go to the franchisor in return for offering this ‘turnkey’ support.
Franchisors have the upper hand in every business decision. Their main goal is to ensure there’s consistency with the overall customer service and experience. And while this control doesn’t always mean that a software or service is mandated, it does mean that anytime you catch the eye of a franchisee, the end of the sales cycle won’t be close behind.
Hope on the Horizon
While it’s critical to understand the complexities of selling to franchised brands, there are key benefits that will transpire from using this sales approach.
1. Timing is less of a factor
One of the hidden gems of selling into a franchise network: they aren’t as prone to economic downturn.
The business profitability of a franchisee is likely more stable than its corporate counterparts. In nature, they’re built for less risk, high reward. So as a sales rep experiencing a seasonal lull in the restaurant sales cycle, a franchisee may be more receptive to your outreach.
If your SDRs are first to engage some of these brands, they can capitalize on ~50% of the independent restaurants that frequently get overlooked for being ‘too small’ or ‘too difficult’ to approach.
To add to that, the biggest mistake restaurant technology providers make is overlooking the franchise side of the market due to too many ‘unknowns’. Yes, they’re hard to dissect, but forgoing a sales approach in this segment of the restaurant market means you’re willing to also release ~20% of the TAM that comes from enterprise-level accounts.
2. Turning the tables on a franchisee referral network
Parent brands, like McDonald’s or KFC, can connect franchisees with recommended suppliers to source products that give the entire company a strategic advantage, like discounted inventory. Having a preferred meat or potato supplier, for example, can remove the research investment for a franchisee so they can focus on other operational challenges or solutions. Here’s where you come in.
How you approach a ‘big whale’: mirror their problems with the actual franchisees. If you start small, you’ll prove out your concept quickly. While some factors may be mandated from the top, sub-brands have made great strides in implementing a system or process that actually addresses company-wide challenges, and manage to make waves all the way to corporate.
Let’s take a couple of enterprise brands like TGI Fridays and Sonic, for example, who are known for their extensive franchise network. Their franchisees have been known to make company ‘history’ by successfully implementing a product or service across their stores. Once word catches about how a 35-unit franchise of Sonic was able to reduce food waste by 2X, the remaining franchisees will undoubtedly want to obtain similar results. There’s something to be said for the peer-to-peer learning the restaurant industry is known for, and that network is even more connected in the tight-knit community of franchisees.
3. Top-down, bottoms-up approach
Your best path to penetrating a franchised brand with mixed hierarchies and priorities is to pair sales development representatives with enterprise account executives in a ‘panini’ sort of approach. Right off the bat, you have SDRs that benefit from a larger pool of prospects to choose from. It might take a greater volume of first touches to make progress at first, but it also increases the likelihood that your rep will actually get through to someone.
Every lead an SDR passes through, both parties stand to benefit. This relationship will prove fruitful as long as they are aligned on pricing and sales approach. And depending on the split, there could be a double comp on quotas or SPIFF deals that have huge future upside for the overall business.
Now, the weight of the world doesn’t exclusively sit on the shoulders of your SDRs. For your AEs at the enterprise level, deal sizes are much larger but so, too, is the risk of any deal falling through the cracks due to red tape, decision makers going dark, and/or time to close. These enterprise reps might seemingly carry much more responsibility and pressure to get the deal closed, but if you consider the volume of interactions and monetary value of each opportunity, both roles play an equally critical part in ensuring the impact is felt from both sides.
Start-ups and small businesses, be careful
A quick footnote — if your company is an early stage start-up or on a new trajectory of growth, you likely won’t have the number of reps it takes to proceed with the aforementioned approach. Let us be the first to say, “it’s okay” to table a franchise selling strategy.
For younger companies, there could be a lot at risk if your product isn’t ready for that level of scalability or complexity. In fact, it might make more sense to delay or remove the sales strategy altogether for selling to franchisees.
Factors worth considering:
 Product maturity: Your product’s existing feature/functionality does not support multi-store users, above store users, cross store reporting, shared inventory, etc.
 Visibility and precedence: The potential of actually closing a franchise opportunity could be more scary than it is beneficial. You’re fully aware your up-and-coming start-up isn’t ready for the spotlight, let alone having a single customer take over your product roadmap with custom integrations and specific feature-build out.
 Cost: You do not have the headcount to sell, process orders, etc. for really fractured brands. Even if you love the idea of quick wins, doing individual demos, contract negotiations, and site setups, the overall investment could simply be too costly for a smaller organization.
While franchisees might not have any buying power under their parent brand (depending on the situation), they are a door to a larger opportunity as long as you know how (and when) to approach it to suit your business needs.