Sales versus fulfilment: Are franchisors making it too easy for franchisees?

When franchisors create centrally-managed sales functions and distribute confirmed orders for franchisees to fulfil, do franchisees become complacent and forget to generate sales for themselves?

This is an interesting question, and one which both franchisors and franchisees will answer very differently, and depending on the nature of the business.

For example, it has been common for many years for home services franchises to filter all incoming inquiries through a single, centrally-monitored phone number, and for these inquiries to be qualified and then referred out to franchisees as hot prospects for jobs.

Often all the franchisee has to do is to show up and offer a quote in order to get the work, with the sale process partially or substantially accomplished by the franchisor’s call centre beforehand.

The advent of the internet, improved websites and mobile apps have expanded the inbound sales role of the call centre beyond just taking inquiries. Now, customers can log onto a website and buy their desired goods or services from the brand in question, with the sale often being fulfilled by the nearest franchisee (though it is acknowledged that not all franchise eCommerce models work in this way).

Take pizza, for example. To order a pizza, just log on to the appropriate website, order and pay online, and then wait for it to be delivered by your local store, or go there to pick up your order.

This process creates in-store efficiencies with the potential for more staff to be allocated to making and delivering pizzas, rather than answering phones to take orders.

Which begs the question: Do franchisees who have sales delivered to them by their franchisor take their foot off the accelerator in their own efforts to generate sales?

In other words, rather than seek to continue to increase their sales through their own endeavours, are franchisees likely to take the extra sales created by their franchisor as a substitute for their own efforts, thus maintaining their overall performance at about the same level, but with less effort required on their behalf?

To rephrase: Same outcome with less effort. Sounds tempting.

The Franchise Advisory Centre is not aware of any research that has explored this issue, but no doubt, if it exists, such research would be of great interest to those franchisors who currently offer centralised sales in one form or another.

The results would be as likely to vary from one system to another as they would for one franchisee to another, but at a wild guess, the results will probably be dependent on the underlying profitability of the franchisee, the extent of their own role in generating sales for the business, and the business’ capacity to resource additional sales.

So if a franchisee is satisfied with their profitability and has limited or no capacity to resource extra sales, chances are that sales they receive from the franchisor could come at the expense of their own sales efforts.

For some systems, this may not be an issue as it may be preferable for franchisees to concentrate on the fulfilment of sales orders provided by the franchisor, than for the franchisee to seek their own sales (for example, the technical support and repair divisions of electrical goods manufacturers).

However, for others, it may represent lost customer opportunities or royalty income.

The introduction or expansion of any centralised sales function by a franchisor should be monitored carefully to ensure that it is achieving the desired outcomes for a network.

If franchisees are free-riding off these sales efforts at the expense of their own (and especially when there is room for improvement in profitability or operational efficiency), then franchisors must carefully consider how such sales process are implemented and how they are monitored against established franchisee performance.

Otherwise, franchisor sales efforts that have the capacity to lift franchisees to spectacular results may still result in mediocre outcomes.

Jason Gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for 20 years at franchisee, franchisor and advisor level.

He advises both potential and existing franchisors and franchisees, and conducts franchise education programs throughout Australia, and publishes Franchise News & Events, a fortnightly email news bulletin on franchising issues and trends.