Are you wondering what the current state of franchise sales and marketing trends looks like?
This podcast episode is a rebroadcast of the Moving Beyond the Coronavirus Economy series as our host, Tom DuFore, takes us through the most up-to-date sales and marketing trend data available.
SPONSOR
If you are ready to talk about franchising your business you can schedule your free, no-obligation, franchise consultation online at https://bigskyfranchiseteam.com/ or by calling Big Sky Franchise Team at 855-824-4759.
LINKS
- https://www.ismworld.org/globalassets/pub/research-and-surveys/rob/pmi/rob202108pmi.pdf
- https://www.ismworld.org/globalassets/pub/research-and-surveys/rob/nmi/rob202107svcs.pdf
- https://www.ismworld.org/globalassets/pub/research-and-surveys/rob/hospital/rob202107hos.pdf
- https://www.franchiseinsights.com/
TRANSCRIPT
Tom DuFore, Big Sky Franchise Team (00:01):
If you’ve been wondering how to franchise your business or how to take your franchise company to the next level, then this podcast is for you. My name’s Tom DuFore and on today’s episode, we’re going to do a webinar replay of a webinar that originally, was live recorded on August 19th. So this is the recording that talked all about current franchise sales and marketing trends and other economic data that’s available. So we’ll go ahead and jump into my presentation that I gave on our Moving Beyond the Coronavirus Economy Series that we’ve been running since the pandemic first hit in March of 2020.
Tom DuFore, Big Sky Franchise Team (00:41):
Hey everyone. Thank you for joining us here on the Moving Beyond the Coronavirus Economy Series and as everyone is logging in and joining us here, I just want to do a quick hello and introduction. My name’s Tom DuFore with Big Sky Franchise team. And if this is your first time here, just want to let you know that this is a monthly presentation we do on what’s happening in franchise sales and franchise marketing trends. And just taking a look at some macro economic indicators as well, and how that may play into or contribute to what you’re doing in the franchise sales and marketing efforts.
Tom DuFore, Big Sky Franchise Team (01:24):
And just by and large, in general, general starting off from franchisor sentiments that we’re hearing from our clients and that we just see with franchise sales activity in general right now, we are definitely feeling a little bit of the dog days of summer with the lead flow being a little slower or reduced, franchise candidates a little less responsive, or a little less apt to schedule those video calls, Zoom calls, or just even conference calls or a conversation to talk about the brand.
Tom DuFore, Big Sky Franchise Team (02:01):
So if you are seeing or experiencing some of that as well, you are not alone. But I would like to go ahead and jump into the presentation and go over some high level, how we like to start this is just on a high level presentation to go over some of these macro indicators. So I’m going to share my screen for you, to go ahead and get this going.
Tom DuFore, Big Sky Franchise Team (02:29):
So the first place I always like to start is this Institute of Supply Management does a Purchasing Managers’ Index report. And if you’ve joined us before, you’ve seen this. If you’re new to us here, I love taking a look at this as just a leading indicator, manufacturing, such an important indicator, even though as a percentage of overall economy it’s smaller, but it’s so critical. It’s such a great leading indicator to see what’s happening. And for the month of July, the PMI, the Purchasing Managers’ Index showed that 59.5%, or four out of five sub indexes that directly factor into PMI we’re in a growth territory. And so all of the six biggest manufacturing industries expanded in the following order, computer and electronics products, fabricated metal products, chemical products, food, beverage, and tobacco products, transportation, equipment, and petroleum and coal products.
Tom DuFore, Big Sky Franchise Team (03:27):
And what’s important about this graph and this line here is that anything above 50% means that it’s growth, it’s growing, that manufacturing orders are increasing. So if you can see here, these were actually record numbers for the index since comparative to the 1980s. So these are records that are being set very, very high indicator. And just something we’ve talked about before here’s where we saw the recession hit in 2020 on the chart. It looked… April, May, June. And if you look back around August of 2019, it dipped below that 50 percentile number, which was an indicator that maybe the economy was starting to slow down back then anyway. A second report that’s put together by the Institute of Supply Management is the Services Index. And this here is showing, it looks like here it shows it dipped a little bit in June, and it popped back up in July to 64.1%.
Tom DuFore, Big Sky Franchise Team (04:35):
And that was a four percentage point increase compared to June’s figure of 60.1%. This is the highest reading since the inception of the PMI in 2008. So this is the highest reading on record in 13 years of this report being created. So this reading indicates the services sector grew for 14 consecutive months after two months of contraction and 122 months of growth before that. And a reading of 50% indicates services sector economy is generally expanding and below that 50% indicates that services sector is generally contracting. So look, all things on services clicking, firing away as of last month, which is a good leading indicator for where we’re going. And then we can take a look at the hospital sector as that’s grown. They’ve added this report here and the hospital PMI registered 62.8% in July decreasing 0.3 percentage points from June at 63.1, indicating 14th consecutive month of growth.
Tom DuFore, Big Sky Franchise Team (05:38):
And so all in all, this is showing growth for the economy and most likely continued growth for what we would see, even just looking at manufacturing that usually has a trickle effect for several months after. So we can look at this saying well, probably between now and through the end of the year, things are still looking very strong. I want to talk about US retail figures. You’ve heard a lot about that, but retail figures increased 31% year over year in Q2. So in improving economies, stronger consumer demand, I’ve recently read some articles, talking about kids and children driving much of that retail business, the overall retail availability rate. And this is through CBRE. If you’re familiar with CBRE, this is the US retail figures from their website. The overall retail availability rate fell by 30 basis points quarter over quarter to 6.2%. A total net absorption remained positive.
Tom DuFore, Big Sky Franchise Team (06:38):
Retail completions it talks about here. This is an interesting one. Average retail asking rent increased by 20 BPS quarter over quarter. I’m guessing that’s basis points that they described there. So 20 basis points quarter over quarter and 10 basis points year over year. So we’re seeing average retail rent asking prices increasing. So as we’re seeing that increase, these are again, indicators that things are moving along in the right direction for the economy.
Tom DuFore, Big Sky Franchise Team (07:17):
Now, one of my favorite reports is through Franchise Insights and FranchiseInsights.com. This is their Small Business Startup Sentiment Index. This is one of my favorites because it’s focused on small business, which is where we spend most of our time. One thing for you to talk about by the way, with prospects. So let’s take a step back here, go back on the CBRE.US report here on the US retail pricing.
Tom DuFore, Big Sky Franchise Team (07:47):
What this means, if we look at this right here, where it says the average asking retail, I’ll zoom in a little bit if you can see that. The average retail asking rent increased by 20 basis points, quarter over quarter and 10 basis points year over year to $20.86 per square foot. What this means for you as a franchise sales and marketing person, if your franchise has any sort of retail component to it, which any restaurant, any retail business, obviously that’s retail. You can look at this and say, look, the longer you wait to move, the more expensive rent is going to get. So any interest in thinking, well, maybe I’ll wait for rent to come down or for vacancies to pop up. That doesn’t seem to be the trend here. It does not look to be happening.
Tom DuFore, Big Sky Franchise Team (08:42):
It looks like retail is actually going up, which means vacancy is most likely increasing. If prices are going up, that means reduced supply or increased demand with the same amount of supply. And so therefore prices are going up, which means if you’re going to get into it, they need to move sooner rather than later, if they’re going to do it. And so if you’re in a retail or food based franchise, this is data and information for you to share. And same thing for looking back at the Manufacturing Index. Just want to… I forgot to give a quick point of reference here. This is just a great leading indicator. So if someone says, “Well, I’m not sure what’s going on with the economy. I don’t really know what about the coronavirus.?” And we’ll talk about the coronavirus here in a second as well.
Tom DuFore, Big Sky Franchise Team (09:34):
What about all these things that are going on? Well, if we look at this Purchasing Managers’ Index report, it’s showing that manufacturing, purchasing agents are feeling confident that consumer demand and demand in general is going to continue to increase, which is a good thing for many months to come. So keep that in mind, they’re buying parts and supplies for goods that are going to get manufactured and sold maybe six months from now, maybe a year from now, by the time that the actual sale happens. So just keep that in mind for folks who are overall concerned and speaking of the Coronavirus, let’s just go ahead and take a look at this is the CDC, the Center for Disease Control and Prevention. I always forget all the acronyms here, but this is the current, this is as of right now as of yesterday it’s showing here for August 17th.
Tom DuFore, Big Sky Franchise Team (10:35):
So it’s showing what’s happening. This is the total number of cases in the United States. And this red line is the seven day trend line. And so what I think is interesting to see, while what’s making headlines are these big spikes in cases which may be showing that maybe there’s seasonality to this virus, but what’s looking good is you starting to see this curve starting to round off, it looks like it’s starting to round off. So maybe it’s starting to slow down here and hopefully come back down. Now what’s a really good sign that I don’t hear talked about very often, but when you look at the numbers is previously, when we would see those huge spikes, this is the number of daily deaths. And I know it’s morbid to talk about, but this is important for you to know, and to be able to maybe share or talk about with your franchise candidates that are maybe nervous right now about this.
Tom DuFore, Big Sky Franchise Team (11:34):
And this is to show how, if you looked at this is daily deaths, and if you notice that these curves from last year and into early part of it this year, the deaths coincided very clearly with the… Or very consistently with the number of cases. So as cases increased, the deaths showed a very similar path. Well, that is not the same as of right now. Look how much smaller this uptick in deaths is right now. And I don’t want to diminish the importance of any life, that’s not my intention here. It shows 554 deaths here compared to almost 3,900 deaths back in the January time period.
Tom DuFore, Big Sky Franchise Team (12:18):
And so if you look at this curve here, look at this big spike, you can see these spikes happening previously, and you compare that to the deaths right now. And so to me, that’s a good thing. That means that even though people are maybe getting sick, they’re recovering and that people are taking better care of themselves and we’re aware of what’s going on. So that’s a good thing just to be aware about, because I’m sure prospects, if they’re not telling you about it, they’re at least thinking it, maybe I want to wait until I get through this next wave of stuff that’s happening, or get my kids through the starting of school. I know we’ve had that situation in our own household with school starting and cases of the coronavirus and so on. But anyway just things for you to be aware of, as we’re thinking about that.
Tom DuFore, Big Sky Franchise Team (13:10):
Now onto the Small Business Startup Sentiment Index. So let’s talk about the Startup Sentiment Index. So this question is one that they ask everyone, is now a good time to start a business? And so in the month of July, it showed that almost 66%, so 65.9% of respondents said they agree or strongly agree with that. So 67% of people almost, or 66% of people agree or strongly agree. Now that dropped a little bit from June. June was extremely high. It’s dropped a little bit here in July, but still very seemingly very optimistic. And you can kind of see the trend on the screen here, where you’ve got this kind of steady trend of uptick since August of last year, it’s slowly been trending up from about low 50th percentile on up here to the mid sixties where we’re at now at about 66%. So you can kind of see that line starting to form there. So I think that’s just good things for you to know.
Tom DuFore, Big Sky Franchise Team (14:22):
Now they talked about what is the outlook on business conditions and it remains positive. So 40.7% see business conditions getting better or much better. And so if you look on the far right here, you see this green and blue line, that green line is better or much better. The blue line or this turquoise line is about the same. And this red line is worse or much worse. And it shows that the worse or much worse did grow in July, but the overall sentiment is still positive as a whole. There’s far more positive sentiment than viewing this as… So it’s either neutral or positive is by far the majority of what’s going on.
Tom DuFore, Big Sky Franchise Team (15:13):
So 40.7% see it getting better or much better, and you can see over 40% consider it to be about the same. So we’re talking over 80, roughly 85% are viewing this as about the same or better or much better. So this is a good thing for the general sentiment of your prospects, but know that 15%, so about three out of 20, about three out of every 20 leads you’re talking to may be a little more nervous, maybe a little more concerned about what’s happening, going on.
Tom DuFore, Big Sky Franchise Team (15:47):
So how likely are you to start a business now compared to three months ago? And this bright green line says much or more likely than three months ago. And this number is up pretty high, it’s at 63.4%. about the same is at 25.6%, and less or much less likely is 11%. So that tends to coincide with the chart that we looked at previously as well. So startup intentions this month remain elevated. So basically we’re asking, when do you think you intend to start your business? 27.4% in the month of July said that they wanted to start it this month. About a quarter, 25% said in two to three months. Four to six months out was 21%. So if you look at this and you kind of do just some quick math, we’ve got what 28, 50, about 74, 75%, about 75% or so, 74% of all respondents to this look like they would be wanting to open their business now and the next six months. Between now and the next six months or approximately sometime between now and the end of the year is when they’re thinking about starting their business.
Tom DuFore, Big Sky Franchise Team (17:09):
So things to keep in mind, and you should be talking about this with your prospects when you’re talking to them on the phone or emailing with them to say, by the way, if your plan is to have your business ready to go for 2022, you need to be ready. You need to get started now, you need to open, you need to move through this franchise process now so that you can find a location or get through training, get things up and ready, get build out, construction, even for a services or a home-based business, it’s still going to take three to six months for them to open. So end of year, they need to be thinking about moving now and getting that going started today if they want to be ready by the end of the year.
Tom DuFore, Big Sky Franchise Team (17:54):
Otherwise they’re going to miss that opportunity to be open January or maybe December, or if it’s a retail business, it’d be great for them to be ready by November if that would be possible. It’s probably a little stretching right now for that to happen, but you never know. So in this report here it asks about what is… This chart here asks about what is the availability of funding. And 56% of respondents said that they think the access or ability to get funding is about the same as it was three months ago. So it’s about the same. So the majority of people consider it about normal. 27% think it’s harder or much harder. And then 14.6% have said that it’s easier or much easier.
Tom DuFore, Big Sky Franchise Team (18:53):
So these are just some key insights. The last one that I want to talk about here is, the question asks, which of these factors will have the greatest impact in the next six months on your decision to start a business. And I’ll just go from these left to right, the number one reason, or the largest factor that people are saying will contribute to them starting a business in the next six months is funding or access to credit. Far above and away, it’s over 60% of respondents said that for… It’s 66.9% for July said that access to funding or credit is their number one reason that will impact their decision to start a business. The number two reason is the economic climate, and what’s interesting on the chart if you can see this here, I’m going to zoom in, or if you’re listening in, the chart shows a steady decline over the last year or so, that the economic climate and outlook continues to be less of a concern for people who are looking or considering to start a business in the next six months.
Tom DuFore, Big Sky Franchise Team (20:15):
So what that means, it shows for July of 2021 here that 22.5% of respondents view the economic climate as a serious concern for them in terms of starting a business. What that means on the other side is 77.5% of respondents don’t think it’s as critical of a factor in them making a decision. What that says to me if I’m in your shoes as a franchise development or marketing professional, I’m thinking the fear of the recession, the fear of the pandemic of the Coronavirus is subduing. It’s going… It’s subduing, it may not be gone away, but I think people are recognizing the fact that we’re probably going to be living with this. It’s not going to ever… Doesn’t look like it may ever go away. Just maybe part of flu season and now Coronavirus season in or something that’s at least what it looks like to me. So I think people in general are starting to maybe recognize that fear is starting to subdue and that access to capital continues to be the number one concern there.
Tom DuFore, Big Sky Franchise Team (21:33):
One of the things I do want to go over… Oh, I just lost this, is a really cool report that came out from Franchise Insights again, this is at FranchiseInsights.com and this was a really cool report. This came out August 11th. So this came out about a week ago and it says, “Franchise prospects, more likely to respond to email or text messaging over voice for an initial contact.” And it reads, “A majority of aspiring owners say that they’re most likely to respond to an email as the initial contact about a franchise in the July, 2020, 2021 mystery shopping survey by FranchiseInsights.com. Text messaging was second in order of preference for initial contact followed by a voice call when respondents were asked to rank voice, email, and text. In the July survey 62.7% said that they were unlikely, or very unlikely to accept a phone call from a franchise if they had not previously received a text message or an email from that company with more information. Email remains the most preferred channel at 53.4% of respondents.”
Tom DuFore, Big Sky Franchise Team (22:51):
So on the chart here, you see the first choice. First choice is email far above and away is the leader. So people, when you get that lead, they want an email first from you to make an introduction, maybe send them some links, tell a little bit about the brand and the opportunity, give them some things to take a look at, followed by voice, and then by text. That’s the first choice. Then the second choice is text message. So send an email and then maybe you’d follow up with a text message that says, “Thanks for inquiring. We’d love to schedule a call or send you some more information. When’s a good time to schedule an appointment?”
Tom DuFore, Big Sky Franchise Team (23:33):
And then the third choice was voice or a phone call. So I find that really interesting. It may or may not change how you’re responding to people, but it looks like if first choice is email and second choice is text, to me what people are saying is I’m interested in learning more, but I’m not ready to talk to a salesperson yet. I’d like just a little bit more information to get comfortable. So it’s something for you as franchise sales professionals and franchise marketing professionals to be thinking, how can we maybe incorporate some initial email contact as part of our initial follow up program to candidates?
Tom DuFore, Big Sky Franchise Team (24:21):
So I thought that was interesting. A statistic to take a look at. This article… Let me see here, in Inc. Magazine, does this give a published date? This was introduced to me. I’m seeing, here it is, nope, but well, I thought this was interesting just to talk about, because this was kind of cool. There was a 75 year study conducted by Harvard university. It’s one of the longest studies ever done. And what they did is they took a look at, they tracked physical and emotional wellbeing of two populations, 456 poor men growing up in Boston from 1939 to 2014, and 268 male graduates from Harvard’s classes of 1939 to 1944. Due to the length of the research, this required multiple generations of researchers. Since before World War II, they diligently analyzed blood samples, collected brain scans and poured over self-reported surveys as well. And here’s what they found.
Tom DuFore, Big Sky Franchise Team (25:28):
The conclusion is the clearest message… It says here, I’m skipping to this section here. It says, “the clearest message that we get from this 75 year study is this, good relationships keep us happier and healthier period.” So the takeaway of comparing, and there’s a whole lot of info and stuff in there, but good relationships matter. It makes us healthier and happier. And so what can you take from that? Well, in the franchising business, I think it’s a good indication to be focusing on how can you be creating and fostering positive relationships with your franchisees as they come through a franchise sales and marketing and onboarding and using that sales and marketing process in the franchise to be building and developing a positive relationship with your franchise candidates.
Tom DuFore, Big Sky Franchise Team (26:21):
And so that was the episode of the webinar live recording and that’s the end of this episode. So thanks for being here folks, please remember to like and subscribe and give us a review. And remember if you are ready to take your franchise company to the next level and are looking for some help, or you’re ready to franchise your business, look up at BigSkyFranchiseTeam.com. Thanks for tuning in and we look forward to seeing you next time.
