Most franchisors find it difficult to determine what percentage of their overall business budget they should allocate for franchise recruitment and where to channel it.
Spending very little often leads to dismal results. Contrastingly, excessive spend can result in disappointing results if the efforts don’t generate sufficient franchise enquiry.
If you are a start-up franchisor, you may not be easily able to estimate what amount to spend. In some cases, you may end up spending excessive amounts, which can leave you with a very meagre budget to support your franchisees. If you are a start-up franchisor, poor planning can also potentially result in financial problems for you.
The best way to avoid these problems is to follow a methodical process while setting up a franchise recruitment budget:
The one problem with following this method is that it can be quite time-consuming. Aside from this, you may end up removing most of the activities from the list in order to find a more financially feasible solution. This is why, the target acquisition method often proves to be more suitable. Let’s take a look at what’s involved in it:
In this method, you start out with a rough cost estimate of recruiting one franchisee and that gives you a better idea of the budget you’d need to set for the entire process. This also means you are able to then either add or deduct from the total number based on your budget.
Aside from these methods, you can also use the historical method of budgeting. Look at the amount you spent in the previous budgeting period/financing year and then either increase or decrease this total amount by a certain percentage.
This method may prove to be simpler because you already have a base amount to work around. However, it might not always be in line with your business growth projections for the year ahead. It means you may end up allocating inadequate funds for your expansion plans.
Since every business is different, the amount a franchisor wants to and is able to spend will be entirely up to them. While these methods of budgeting we just discussed provide a basis for your plan, you might need to tweak them based on the specific needs of your business.
If you want to know more about franchising, feel free to get in touch with us at The Franchise Institute. You can call us on 1300 855 435 or fill in this contact us form and we’ll reply as soon as we can.
Thanks for reading,
The Franchise Institute Team
1300 855 435