Franchisors Outsourcing Franchise Sales: Is It A Red Flag?

Publication Date:
May 11, 2021
Author:
Joseph Sexton
Franchise Sales Organization

As a Franchise Sales Organization, we sometimes have to address concerns from prospective franchise owners on why a franchisor would outsource their franchise sales efforts. After all, if the franchisor has a great team and systems, why wouldn’t they just do it internally?

Here’s a perfect example from an email we received from someone:

“The fact that the franchisor outsources their franchise sales to Oakscale originally raised my antenna a bit.”

Look, we get it. Oakscale is a sales organization and we are, in fact, sales people. And people generally don’t like dealing with sales people for fear of being taken for a ride. You don’t see a lot of press about the honest, ethical, hardworking salesperson that only sold widgets to people who really needed them. 

You do, however, hear stories of sleazy sales people who bent the truth or flat out lied to line their own pockets with commission checks. I’d venture to guess that 99% of press about sales people is bad press. 

When it comes to franchising, there are certainly some bad actors out there that sell franchises to people that are not qualified, either operationally or financially, in order to collect franchise fees. But for the most part, franchisors are ethical, and so are their franchise sales teams. Smart franchisors are selling franchises because they want to build up a strong royalty stream over time, not to collect upfront franchise fees. So it behooves them to disqualify prospective franchise owners that will ultimately fail, draining time, energy, and resources along the way. And let’s remember that invaluable asset called brand equity that can make or break your franchise system. How likely is it that you get a second chance at opening your franchise in Omaha when the first one failed? 

There appears to be two layers of fear: One, the natural fear of salespeople, franchise or not; and two, the fear of a franchise sales organization whose entire role is to sell us a franchise. 

But does that mean steer clear?

Consider Five Guys Burgers & Fries? And Sky Zone Trampoline Parks. Just a few of the countless household name brands that leveraged franchise sales organizations to launch their brand. Doing so was a smart move for their growth. And here’s why.

Franchisors know their business inside and out. They know how to train you, how to support you, and they’ve developed relationships and partnerships that benefit you in terms of cost and speed to profitability. 

But one thing they’ve never done before is sell a franchise. 

That’s where franchise sales organizations make a lot of sense. 

Using Oakscale as the example, our team has collectively sold thousands of franchises over the last 15 years. We know how to do it, and we’re really good at it. We do it ethically, legally, and a lot quicker than the majority of new franchise brands can do it themselves. 

This frees up the franchisor to focus on you, the franchise owner, making sure you’re well trained, well supported, and on the quickest path to success. 

Would you really want your franchisor tied up in a legal meeting trying to figure out how to file a franchise exemption in California for some person you don’t know (that may or may not join the franchise system) while you’re trying to figure out the most effective ways to spend your marketing dollars in your local market? Probably not. 

It’s a mutually beneficial relationship for the franchisor, the franchise owner, the prospective franchisee, and the franchise sales organization. 

Franchise sales organizations have different business models so it’s not uniform exactly how they make money, but yes, in general, they make money from the sale of franchises. 

Franchisors also make money from the sale of franchises, but without tying up capital and resources that should be allocated to franchise owners who have already joined the system. This is beneficial for both franchisor and franchisee.

You could argue that franchisors would make more money if they did not outsource their franchise sales, but that’s only on a per franchise basis. If a franchise sales organization can sell two franchises for every one that you could’ve sold, then it makes a lot of sense. And in all likelihood, the ratio is much greater than that. 

So why is it beneficial for you, the prospective franchisee? Well, if you become a franchise owner, then we’ve already covered that. But in your due diligence process, look at it two ways:

  1. This franchise sales organization is incentivized to sell me a franchise. Her whole company is built on it! Thus, I don’t trust this person, the organization, or the franchisor for making such a bad decision.

OR

  1. This franchise sales organization has guided hundreds of people to franchise ownership of thousands of locations, and turned away thousands of people who weren’t qualified to be a franchise owner. They know what they’re doing, and while they need to earn my trust, I’ll take it step by step with them to see where it leads. It makes sense that a franchisor would want to focus their energy and resources on franchise owners.

The second view is probably wishful thinking. We know you're not going to trust us 100% right from the start, nor should you, but give us a chance to earn that trust by approaching things cautiously rather than skeptically. You might just find yourself enjoying the process of learning about a franchise. 

Most of us are kind, ethical people with families of our own, and you can be assured we’re watching out for the “bad guys” ourselves.