Are franchise lead generation websites going to move to Pay Per Lead?

Pay Per LeadYes and no. Yes is the short answer and no, not in the immediate future. First, let’s see why franchise lead generation websites will have to use a Pay Per Lead model in the future.

Franchisors are now very well educated about the Internet. Before, it was this neat little tool that got you a few extra leads but recent surveys has shown that franchisors now get most of their leads from the web. A large chunk of the franchise sales budget goes into the Internet and when you spend a lot of money in something, you want to know what you get in return, right?

So far, franchisors have paid what I call a membership fee: a recurring charge to allow a franchise company to be listed on a franchise portal. Whether you get 1 lead or 1000, you pay the same monthly price. It’s like an all-you-can-eat formula.

But budgets are shrinking and franchise websites are multiplying like gremlins in water. Franchisors have much more avenues than before to advertise online and they want to know what they pay for. That’s legitimate.

FranchiseGator (the top franchise lead generation website, in case you just got back from Mars…) now works entirely on a Pay Per Lead model. They are the only one in the industry to do that. The price varies depending on different factors such as the amount of leads expected, the number of States where the franchise is sold and so on.

There is no surprise anymore. You can easily measure the results. I believe FranchiseGator is slowly setting a new business model. Now that franchisors know they can be in total control of their online lead generation dollars, they want the same control on all websites they advertise on.

Now the problem is that franchise lead generation websites don’t want to go this way for the simple reason that they know they’re not going to be able to generate enough leads to match the amount of money they make through memberships. I might make enemies on this one but this is a personal blog so I guess I am free to say whatever I think.

If a portal charges $600 to be listed on the site and provides 20 leads a month, that’s $30 per lead. Now if the same portal charges the same client $30 per lead but only get 10 leads per month, that’s a revenue of only $300.

The membership model provides a certain level of safety for the portal. Whatever happens, they know how much money they will make. Having a Pay Per Lead model put all this in jeopardy and a bad month in term of visit would mean a bad month in term of revenue.

I think it will still take at least a couple of years until all major franchise lead generation sites turn to a Pay Per Lead model. Under the increasing pressure of franchisors, they will have to make the big turn. They might lose money but franchisors will be in total control of their Internet leads.