Which Franchise CRM is best for you?

Blocks for Customer-Managed Relationship ConceptAssuming you’ve decided to adopt a Customer Relationship Management (CRM) solution in your franchise (or replace your existing solution), the purpose of this article is to help you select the franchise CRM that is a best fit for your organization.

Before we begin, let us recap the findings of our recent article on franchise development:

  • On average, franchise development teams are fairly small (3 people)
  • On average, franchisors only sign a handful of deals each year (7 deals)
  • The franchise development process is similar to the sales process in other industries where a long term relationship is established around a recurring revenue stream of similar magnitude ($25,000 to $100,000 per year).

But wait a minute – we just dove into franchise development without actually specifying if that’s actually the core process we’re trying to improve! Many people equate franchise CRM to the tools used by the franchise development team to award new units but there are, in fact, many types of franchise CRMs.

Which type of CRM are we looking for?

There are three main types of CRMs to be discussed in the context of a franchise system. Most franchise systems need only two but service franchises typically utilize a third type.

  1. A franchise sales CRM with the goal of narrowing down the hundreds or thousands of candidates to those who are awarded franchises.
  2. An operational CRM helping your organization manage the franchisee’s launch, keeping track of franchisee information, important contract renewal dates and, more importantly, enabling your operations team to work hand-in-hand with your franchisees to improve performance.
  3. The franchisees of a service-based franchise also utilize a CRM to manage their own sales/operations and their customer base. In a retail or restaurant environment, they utilize a point of sale system instead (perhaps augmented with a loyalty program).

In the next sections, we’ll cover the important characteristics of each type of CRM.

Important features in the franchisor’s sales CRM

The goal of the franchisor sales CRM is to assist the franchise development team in awarding new units. As we discussed in our previous article, this CRM is used by a limited number of people closing a limited number of deals per year. An interesting rule-of-thumb known by franchise development professionals is that franchisors typically convert only 1% of their inbound leads into franchisees. This implies that even if we sign only 7 deals this year, we’ll have evaluated around 700 candidates in a year. Without going into details about franchise development best practices, here are some important features to look for in your franchise sales CRM:

  • Ease of importing leads from various sources (your website, franchise portals, franchise brokers, etc.) into your CRM
  • Ease of use in moving candidates from one stage to another
  • Supporting the creation of tasks on every candidate, to ensure your development team can proactively manage the cycle and nothing falls through the cracks
  • Ability to integrate with email marketing tools
  • Ability to request information from franchisees at different stages in the process, storing this information within the CRM
  • Ability to record notes within the context of each prospect

In essence, these are fundamentals of any sales CRM, precisely because the attributes of the franchise development process are similar in nature to the standard sales processes used by many organizations. Although a critical phase in the franchisee’s lifecycle, the 3 to 12 months you’ll spend exchanging with a potential franchisee before you award them a franchise pales in comparison to the 10, 15, 20 or more years they will spend in your system. The franchisee selection phase is a completely different beast than helping your franchisee grow over the next 20 years and, as such, that’s why we have separated out the franchisor’s operational CRM.

Important features in the franchisor’s operational CRM

The goal of the franchisor’s operational CRM is to manage the relationship with existing franchisees. It is typically used by the operations team (including the franchisee’s field coach), the legal team (to track legal agreements) and the franchise executives. As the development team is often involved in the franchisee’s launch, they are also typically involved as they assist in that process and eventually hand off the franchisee to operations.

As mentioned above, the franchisor’s sales CRM and operational CRM both have different purposes. The operational CRM will follow the franchisee during a much larger portion of their journey. Furthermore, improving unit-level economics is the key driver behind sustainable growth. The operational CRM thus can indirectly help you grow faster by increasing the appeal of your business model. Finally, the rise of the multi-unit owner implies a large portion of your future growth will come from within, decreasing the importance of the sales CRM. Over 75% of all franchise restaurants are now owned by multi-unit operators.

As a franchise grows, we’ve seen how the number of users in operations will grow proportionally whereas the number of users in development will typically remain almost constant. These dynamics cause the following features to be more important in the franchisor’s operational CRM:

  • Ease of use by the franchisees (as franchisee engagement is a critical driver of franchise growth)
  • Ease of use by the operations team in their quest to improve unit-level economics
  • Capacity to aggregate information from multiple data sources (point of sale or franchisee CRM, accounting packages, customer satisfaction modules, etc.)
  • Capability to derive actionable insights from the aforementioned information

You’ll notice this set of features is quite different from the features required in the sales CRM. You’re not pushing candidates through a process, we’re working the relationship on a recurring basis. The operational CRM is often simply called your franchise management system.

An important realization is that an emerging franchisor with say 50 locations will have a franchise development team that is of similar size to the operations team. However, once the franchise grows to an average of 275 locations, the operations team may be five times bigger than the development team. As such, needs will shift over time and, in the case where the same software is used for both tasks, the needs of both teams should be weighted accordingly.

Important features of the franchisee’s CRM

The goal of the CRM used by the franchisee is to help them convert prospects into customers and manage the ongoing relationship. Because the needs and processes vary drastically per industry, it is difficult to define the most important features of the franchisee’s CRM.

As an example, a franchise system where the franchisee is continuously cold calling local businesses to land printing contracts will have completely different needs than a locksmith franchise, which generates business via online ads to be performed by local technicians or the needs of a child education centre.

Still, in all cases the franchisee-level operations will require industry-specific software to help them run the business (point of sale, class management software, job management tools). Although these are focused on operations, most will include a simple sales CRM component. In cases where the sales component is the key aspect of the business (ex: cold calling), this function is typically separated from the operational software. (A print shop will have industry-specific operational tools to design graphics and manage printers separated out from their sales CRM.)

The most important features are thus:

  • Be adapted to your industry, ensuring ease of use and efficient execution
  • Capacity to easily export data to other systems, such as the franchisor’s operational CRM or accounting systems.
  • Support aggregation of operational data (sales, jobs and other key performance metrics) across locations

Do you need a sales CRM built specifically for franchises?

We have shown that franchise development teams are relatively small, that they don’t close that many deals per year, that the franchise development process isn’t really unique and that your sales CRM is not as important as your operational CRM.

Because of these characteristics, we believe that you should use a best-of-breed sales CRM built for a broader market (there are over 164,000 people with the title inside sales representatives title on LinkedIn) instead of a franchise-specific CRM built for the 4,500 people in franchise development (according to LinkedIn). A best-of-breed sales CRM will offer higher quality features and more diverse integrations, at a fraction of the cost.

The logic is different for the operational CRM, where the software is designed to help improve performance across a potential market of over 800,000 establishments in the USA alone, with a very specialized set of needs. A best-of-breed CRM will be weaker in this context because it is simply too generic for this process without endless customizations, as easily observable when considering the 800 pound gorilla in the CRM space.

The leader in the CRM market is SalesForce. According to this article based on public financials, SalesForce had 150,000 customers, averaging 25 users per customer, two years ago. They have grown since, but this means they had roughly 3,750,000 users in 2015. A handful of franchise systems utilize SalesForce with varying levels of satisfaction. The main issue with SalesForce is that it needs to cater to such a broad market of diverse organizations (from finance, to big pharma, to automobile, etc.) that it becomes too generic and loses in simplicity and ease of use. The platform can be tailored to do anything (at a heavy cost) but it is primarily overkill for a franchisor’s three person development team. Even if you load up all your franchisees and leverage SalesForce as your operational CRM, functionality will be proportional to your budget. It is likely that SalesForce will simply be a repository of information rather than a tool utilized by your operations team to drive growth.

We believe that there are lightweight best-of-breed sales CRMs which are a great fit for franchise organizations. These franchise sales CRMs play nicely with our franchise management system, built from the ground up around the goal of improving franchisee performance. Contact us if you’d like to learn more about either solution.



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