Continue learning about franchising beginning with this free report: 7 Habits of Highly Effective Franchisees. Get it now by subscribing to my newsletter!
Do the people who sell franchises make too much money?
It’s a debate that never ends.
My point of view? No!
It’s an ops issue
But that doesn’t mean anything because the debate isn’t about how much money the development people earn as much as it’s about how much money the operations people do not earn!
And it’s the ops people who keep the debate alive (because the sales people, understandably, don’t want the focus to be on their compensation).
It’s also understandable why the ops people keep the debate alive. They are often the folks who have to “clean up” after the sales person’s work is done (and the money collected) and that’s not what they’re really paid to do.
Problem begins with the need to sell
The problem begins with the franchisor’s need to sell franchises. Many franchise companies rely on new franchise sales just to keep the lights on in the corporate office. It’s not the ideal, but it’s reality. I’ve got a collection of fascinating stories from franchisors who told me about their early franchise sales – sales they later wished they could take back. They realized, sometimes even as they signed the franchise agreement, that they sold the franchise to the wrong person, but . . . they needed the money to make the payroll.
It’s not unusual for franchise companies to sell franchises to the wrong people for the wrong reasons, and for a development person justify this by saying: “We never know who will turn out to be a great franchisee – sometimes the guy we thought would be a winner turns out to be a disaster.”
True enough! I’ve seen that happen many times through the years. But it doesn’t help the debate.
Cleaning up after the sale
In fact, it exacerbates the debate because it’s the ops people who have to clean up the disaster!
I’ve heard the horror stories from ops people. “I met this franchisee for the first time and even though he’d been through our training there wasn’t any possible way that he could succeed as a franchisee. His first question was: How do I turn on my computer? . . . What were they thinking when they sold this guy a franchise?”
Well, Mr. Ops Guy, they may have been thinking about how they were going to fund their next payroll, including your paycheck! . . . Or, how they were going to hit their sales quota. Or . . . any number of other issues.
Getting to the crux of the issue
That doesn’t help, either! Because now Ops Guy is faced with the delicate and frustrating job of helping the franchisee succeed when, in fact, that may not be possible. Or, if it’s possible, it won’t happen without a lot of extra effort on Ops Guy’s part. There’s the rub!
“I love doing my job,” Ops Guy recently told me. “I love supporting franchisees and helping them tweak our system so that they can succeed. That’s how we’re building a brand, and that’s what my job is all about. But I’m not a magician! I don’t know how to help someone who’s not suited to succeed as a franchisee. And frankly, I don’t want that job. But on too many days that’s the job I’ve got. Why? Because they sell franchises to the wrong people.”
Here’s what’s worse: “And what I really hate is that the reward for selling franchises to the wrong people is every bit as generous as selling franchises to the right people. Makes no sense, and it’s an insult to the operations people. We’ve got to work harder to help those franchisees — which costs the company more money – and we’re not going to succeed anyway. So franchisees fail and that hurts our brand. But the sales guys? They got their money and ran!”
Sell to sell, or sell to fit?
No one can argue with Ops Guy. He’s right! But that’s not to say Sales Guy is wrong. There are bad Sales Guys, no doubt about that. They think their job is to sell, no questions asked, and they don’t worry about the “fit.” But that’s not the majority of the franchise development people. They strive to make good sales if for no other reason than they want the referrals. It’s difficult to get a referral for a new franchise sale from a franchisee who has failed! Plus, many franchisors rely on a selection committee to approve new franchises, so Sales Guys aren’t working in a vacuum.
Recently, this debate appeared on Linkedin, and I was happy to read the comments of Jamie Davis, executive director of business development at Donatos Pizza. Here’s a Sales Guy who asked his franchisor to pay him on an “asset basis” rather than a “transaction basis.” In other words, pay him something for making the sale, but pay him more based on the franchisee’s success.
Davis suggested that his bonus reflect “the success of the system” so that he and the Ops Guy would be paid on a similar scale.
Good idea?
It’s got merit. Now it just needs Compensation Guy to figure out a model. If you’ve got one, please share it!
Email this post
Tweet This Post
{ 0 comments… add one now }