How to choose the right franchisees
As the owner of a franchise business, a huge success factor will be your ability to choose the right franchisees to represent your brand to customers.
Making mistakes when choosing franchisees can potentially take a devastating toll on your company’s reputation and relationships with other franchisees. It can also be expensive and time-consuming to resolve difficult situations.
“It’s absolutely key to find the right franchisees,” says Sherry McNeil, President and CEO of the Canadian Franchise Association. “If you polled our membership, the majority would say it’s your most important job.”
The relationship between a franchisor and franchisee is not the same as that between an employer and an employee. But many of the techniques used to find good employees apply to finding strong franchisees.
These include doing interviews, background checks and trial work assignments to see whether the candidate is well suited to your organization.
McNeil, whose association has 700 corporate members representing 40,000 franchise owners, recommends you start by coming up with a profile of the ideal franchisee. She highlighted the following qualities you should look for in your prospective franchisees.
1. Do they have a passion for the business?
McNeil says one quality that all franchise businesses should look for in their franchisees is a passion for the business and the brand. It’s their commitment to the business that will make them want to work hard and maintain your standards and brand promise to customers.
“When you’re the owner of a small business there’s a lot of things that keep you up at night. It’s the passion for the business that carries them through the things that worry them. I think it’s really important that people love what they do.”
2. Do they have the necessary financial means and business acumen?
Buying a franchise requires an upfront investment and ongoing fees and royalties. That’s why, as part of your selection process, you should carefully consider the finances of the prospective franchisees.
Besides having them disclose financial information on an application, you should verify it by asking for banking and investment statements. You should also do a credit check on candidates.
You should also ask candidates for a resumé that outlines their education and business experience. This will help you assess whether they are likely to have the business acumen to successfully run a franchise.
3. Will they maintain your standards?
A hallmark of franchising is continuity of customer experience across the system. To maintain that continuity, franchises must strictly adhere standardized methods, processes and routines.
A big part of your job in evaluating the suitability of candidates will be judging whether they will deliver on your brand promise.
“Right from the very beginning of the relationship, you should be talking to potential franchisees about your brand standards and expectations,” McNeil says.
4. Is your franchise a good fit for them?
McNeil says buying a franchise is like joining a family in a contractual relationship that will last for many years. That’s why it’s important for both sides to make sure there’s a good fit by doing due diligence on one another.
As the franchisor, you have a strong interest in making sure a potential franchisee clearly understands what he or she is taking on by purchasing a franchise. It’s especially important for them to have a clear understanding of the franchise agreement by reviewing it with a lawyer who has experience with franchising.
It’s also a good idea to get candidates to work in your business for a trial period to allow them to get a feel for how the business operates. This trial will also allow you to assess their skills, abilities and personality. Candidates should also talk to a number of other franchisees in your system to get their feedback on the business.
McNeil says the due diligence process often culminates with what’s known as discovery day. Here, the candidate visits head office for interviews with the president and the heads of the different departments.
“Both parties are trying to judge: Would this make a good business partner to grow the brand?” says McNeil, adding the Canadian Franchise Association offers numerous resources for connecting franchisors and prospective franchisees, including trade shows, publications and their website at www.cfa.ca.
“Do we want to be connected through this brand for the next years? Are our dreams aligned?”