Selecting the right sort of franchisee is critical when building a successful franchised business. It is difficult to achieve and fraught with difficulties.
Recruitment income is less important for mature franchises but it is a vital income stream for franchisors who are growing their networks. The temptation to accept an applicant can be high but it is important to be as cautious as possible because there are many pitfalls. Getting it wrong can be difficult to rectify and very damaging for both the franchisor and the franchisee.
Let’s start with the BFA code of ethics, which states;-
A franchisor shall recruit only franchisees who, upon reasonable investigation, possess the basic skills, education, personal qualities, and adequate capital to succeed.
This all makes perfect sense but, as is so often the case, the devil is in the detail. A prospective franchisee may be able to demonstrate that they are practical, literate and numerate but it is difficult to assess if they will be good at the delegation of responsibility that will be necessary to grow into a bigger, or a multi branch, business. Many franchisors have found that psychometric testing is a useful tool to assist with these more intangible character assessments. This sort of testing tends to be expensive but it is much less costly than dealing with a failed branch that will be disruptive for the end-user customers of the business and bad for the morale of other franchisees.
The code of ethics refers to the need for prospective franchisees to be adequately funded but it is important to establish the source of the funding. Your correspondent once signed up a bright young guy in his early twenties who had more than sufficient cash that his parents had given to him to buy a franchise. What wasn’t discovered until later was that his father had fired him from the family building company for unreliability and laziness. The bank of mom and pop stepped in with funding for the franchise that they thought would solve his problems. It didn’t. The lesson learned being that the franchisee needs to have skin in the game. Adequate funding is essential, but not if it removes the necessity to make a success of the opportunity.
A similar situation can arise if the prospective franchisee is seeking a complete change of lifestyle. This could be when a city trader or senior executive has a vision of joining a garden maintenance or coffee-van franchise. The likelihood of them having a burning desire to succeed would be low.
Another lesson learned the hard way about lack of commitment was when an application was received from the son of the owners of a small farm. He had the skills and the cash that were needed, but what he didn’t mention was that part of the farm had just been sold to Tesco for a new supermarket. Not surprisingly, frequent family holidays in the Caribbean had more appeal than the daily responsibility of keeping customers happy.
Another important fact to establish during the recruitment interview is if the applicant wants to be his or her own boss or no longer wants to work for someone else. There is a big difference. Someone who doesn’t like having to comply with company rules and deliver results that are governed by key performance indicators may not readily comply with the methods set out in the operations manual. League tables, peer pressure or the minimum performance needed to exercise the right to renew are also unlikely to motivate them. Although these are features of many franchises. What is needed from a prospective franchisee is the burning desire to be their own boss, even when it means working much harder than they did as an employee.
There is also a subtill difference between the entrepreneurial approach of most founders of successful businesses and the determined but willingness to comply attitude that is needed from a franchisee. It is a great asset if a franchisee can contribute ideas for improvements to a system. What is not needed is a true entrepreneur who will continually be challenging how things are done and experimenting with new ideas.
The increased use of Zoom and Teams meetings in recent years has created a potential problem area if they are used to replace a face-to-face meeting with the prospective franchisee. It is almost impossible to assess a candidate remotely, and yet some franchisors actually prefer to use this method. There are unlikely to be any statistics on the failure rate of franchisees who were remotely interviewed but It would make an interesting comparison with those who attended personally. This obviously works both ways and many franchise disputes could have been avoided if the prospect had visited the franchisor’s offices before they clicked on DocuSign.
The urge to grow a network quickly is very appealing but as with many things in life, caution is the better part of valour.