By Maddy Coast

In the wise words of the great Socrates, “To know, is to know that you know nothing. That is the meaning of true knowledge.” As the digital world develops, it’s important to keep this principle in mind. What was once a best practice could now be an outdated and ineffective approach. 

The most productive teams in any organization understand that there’s always something new to learn. But what does this mean for franchisors as they reflect on 2021’s accomplishments and set goals for the year ahead? It means turning to Franchising.com’s Annual Franchise Development Report (AFDR), the holy grail of franchise development benchmarks. 

Every year, the report surveys 123 of the leading franchisors in the industry, spanning a range of concepts. Because the data is aggregated from some of the most successful brands, young and old, it has widespread application for any frandev team regardless of concept or size. It’s easy to overlook these stats, but failing to consider what these benchmarks mean for your brand will only lead to diminishing returns and stifled growth. Remember, this survey contains valuable reports from the best of the best in the industry. We’re talking Subway, Dunkin’ Donuts, and other titans who have come to define what the average person thinks of franchises. This means that industry leaders are actually sharing what that standard of success looks like in a very competitive space, a luxury that most industries don’t have. 

One of the major trends of 2021 was the impact of COVID-19. Many franchisors scrambled to allocate budgets in an unpredictable business landscape. Franchisee recruiting budgets hit an all-time high as “The Great Resignation” unfolded, and the average recruiting budget ballooned to $261,543. 

You might guess that the cancellation of so many trade shows and in-person events would have prompted franchisors to move towards digital spending. However, spending in this category fell slightly, and spending in the “Other” category took over. Something to note: digital spending effectiveness rated 3% higher this year. As a digital marketing agency, we weren’t surprised to see this, even with the effects of Apple’s release of iOS14. We know that buying behavior is greatly influenced by our favorite pastime: social media. 

Another great stat to note is the average cost per lead (CPL) and cost per sale, or acquisition (CPA). These numbers have been rising steadily over the past several years, but this year the numbers decreased slightly for the first time, with no reasonable explanation as to why. As a franchise development leader, these are the two most important metrics to look at because you can better evaluate your own average CPL and CPA and make vendor or budget decisions with more contextual understanding of what the standard looks like. According to the report, “Cost per lead, at an average of $197 this year, tumbled from 2020’s average of $312 and 2019’s average of $213…Cost per sale, which many view as the most important recruitment metric, also fell. At an average of $9,270, cost per sale was about three-quarters of 2020’s average of $12,138 and about $1300 less than average cost per sale in 2019. We have no easy explanation for this.” Perhaps the events of 2021 had a profound effect on the franchise buyer’s mindset and people were more likely to seek out opportunities on their own without needing the additional influence of marketing, but we can only hypothesize. 

Another  key metric worth dissecting is lead quality. 78% of survey respondents who reported to have been exceeding their development goals said that they feel lead quality is up, and 74% said they closed a deal where social media was the source. This tells us that franchisors are finding quality candidates through innovative means by leveraging the social space, which influences how we conduct research and, ultimately, make decisions. Franchisors are able to more effectively communicate their concept’s competitive advantages through the use of compelling video. Franchisee testimonials add an element of social proof that so many of us subconsciously crave. It’s worth noting that six out of every 10 franchisors who are exceeding their goals have already increased their recruiting budgets, and 96% of them say that they plan to maintain or even increase those budgets in the coming year. Basically, when you find a strategy that produces deals at an effective cost (at or below that $9,270 benchmark), it’s worth it to pour gasoline on the fire and continue to scale those efforts. 

The best teams understand that there’s always room for improvement. That’s why they make a substantial effort to track their performance metrics, set SMART goals, and then work hard to achieve them. The AFDR states that only half of franchisors track their CPL, down from 70% in 2020 and 79% in 2019, a shocking stat that proves there is major headway to make within the industry as a whole. Without tracking these basic metrics, how can a team effectively measure success or even begin to set goals?

It’s important to ask yourself, “What does success look like for me, and what can we measure to track that progress?” Begin with the basics, and use free tools like Google Sheets to organize your lead generation efforts and your sales team’s communication initiatives. A little work will go a long way, and you may be surprised to find that you’re beating the industry average or are in close competition with the big dogs. You’ll be able to better evaluate the various channels that are fueling your growth efforts and identify gaps within the sales pipeline. 

As we look forward to yet another unpredictable year, we feel encouraged that costs have decreased for franchisors and growth is still happening at a rapid rate. The 2022 AFDR shines a guiding light for the industry to both see where it stands and to get a glimpse of what the future may hold. The reality is that digital marketing is no longer merely a component of the franchise development strategy –– it’s the foundation. C Squared Social is here to help you fine-tune those building blocks and find your next franchisee with creative strategies customized to your brand.