Franchise Broker Market 103: The Lifecycle of a Lead
Since 2017, FranchiseHelp has been building a comprehensive knowledge base on how brokers actually buy leads to find new franchisees.
We’ve now spent countless hours thinking about and working on our FranchiseHelp Consulting Market. We’ve collected many insights after all these years from brokers participating in the market. These are the strategies and tactics we believe are the keys to success in navigating the intricacies of the bidding system. And we’re excited to share more with you.
Today we’re going to focus on the lifecycle of a broker lead: Where they come from, what makes them valuable, and how likely they are to convert into a sale to a franchise owner.
Where do broker leads come from?
As you’ve already learned, when a broker lead does sign with you, you’ll pay a large percentage of the franchise fee to the broker. This can be expensive, but can also be totally worth it since the broker did the top of funnel work for you.
But where do those leads come from originally?
Before they were introduced to you, broker leads started their lifecyle at the top of the broker’s sales funnel, likely as portal leads. When a broker works their top of funnel leads, they get the same 26-28% contact rate as you do. The portal leads they buy are the exact same quality as the ones you buy.
Starting with a large number of portal leads at the top of their funnel, a broker moves some to the next stage and the stage after that, until finally arriving at the one they introduce to you as an end of funnel broker lead. They spend the same amount of money and work (and yes, frustration at leads that don’t pick up the phone) as brands do, to ultimately bring some leads to the end of the funnel to become buyers.
This is why it’s so hard to talk about lead quality. Because we use the same word to describe such different “leads” at the moment they are introduced to a brand, we’ve come to subconsciously expect that a portal lead (which is at the top of the funnel) will have similar qualities to a broker lead (at the very bottom of the funnel). It’s easy to forget that for every lead a broker introduces to you, they worked a few hundred other leads that they didn’t introduce to anybody, and plenty that never picked up the phone at all.
What that lead represents is actually the hundreds of other leads that didn’t work out.
What’s the chance of broker leads becoming franchise owners?
According to the latest FranConnect Report, 1 in about 20 broker leads become sales, and some franchisors report a much higher close rate. Whatever the conversion rate for your brand, you only pay the consultant when a deal closes. When you do close the deal, you can expect to pay the consultant about 40-50% of your Franchise Fee. If your franchise fee is $50K, that’s a cost of about $20-25K.
Compare this to portal leads, where only about 1 in 350 portal leads becomes a sale, and you’ll pay for each of them. However, portal leads only cost about $30, and at 350 leads to a deal that comes out to about $10K per deal.
Why the difference in cost? It all comes down to who does the work. When you buy portal leads directly and work them internally, you stand to save a significant amount of money on each closed deal. When you receive an intro from a consultant who purchased and worked the leads themselves, the consultant gets to take home the difference.
So, should you get your leads from Consultants, or from Portals?
Trick question! Most franchisors should be getting leads from both Portals and Consultants.
At the end of the day, most of what we do in franchise development is additive. Working with Consultants will allow you to meet prospects that you’d have never met via a Portal. And the same way, working with Portals will get you new franchisees that you’d never have closed through a Consultant. In order to maximize your franchise growth, it’s smart to seek out new franchisees wherever they are.
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That’s the basic lifecycle of a broker lead: Where they come from, what makes them valuable, and how likely they are to convert into a sale to a franchise owner.
Stay tuned for our next edition when we talk more broadly about the broker marketplace, how it’s evolved over the years, and what we envision for future relationships between brands, brokers and leads.
Remember to read the previous posts in this series!
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