How To Select The Right Franchisees

A good relationship between a franchisor and franchisee is key to building a successful franchise. That’s why getting the recruitment process right is critical for both parties, Len Rainford, special adviser to Business for Breakfast, says

Having been involved in franchising for over 30 years, I have viewed the industry from every angle and aspect.

My firm belief is that the key to a good franchise is the relationship between the franchisor and the franchisee. That’s why getting the recruitment process right is critical for both parties. Franchising is a people business and understanding how people work, what motivates them, what drives them and what their ultimate goals are all helps to make it successful.

I was talking with a group of businessmen recently and one of them asked me what I did.

When I told them I helped growing companies to achieve their goals through franchising, the conversation changed to franchising and they asked me all the usual questions.

On the subject of franchisees, I made the following bold statement: “The majority of people looking to buy a franchise are over 40, often their lives are in flux and they don’t really know what they want. They’ve got divorced, have been made redundant or are having a midlife crisis. They go into franchising wearing rose-tinted spectacles.”

What does a healthy franchisor-franchisee relationship look like?

The quality of the relationship between the franchisor and franchisee is fundamental to the success of the network.

A healthy relationship is one in which both parties understand that their roles and motivations are different and where both parties deliver what they promised at the outset. It’s one in which they are honest with each other, trust each other’s judgement, communicate on a regular basis and support each other.

It’s often a matter of balance, but understanding and following the ground rules from the start is essential to building a healthy franchisorfranchisee relationship.

Nurturing a strong franchisorfranchisee relationship starts with choosing the right franchise.

Choosing the right business

If you’ve decided franchising is right for you, congratulations, you’ve taken the first step to owning your own business. Next comes the difficult part, choosing the right one.

There are over 900 franchise operations in the UK covering nearly every sector you can think of - from proven part or full-time business-to-business franchises like Business for Breakfast, to consumer, retail, finance and tourism. So how do you choose?

Narrow down the search. What interests you and what do you enjoy doing? Some franchises require certain skill sets or qualifications, while some need more personal qualities. You only live once and a franchise will be a big part of your life, so it’s pointless doing something you don’t enjoy, even if it earns you a good income.

What can you afford? There’s a franchise to suit every budget. Consider how much liquid cash you have to invest and how much you are prepared to borrow. Chances are, you won’t be making a profit in the early days, so take into account working capital.

Once you’ve decided on the type of franchise and level of investment, research the market. What do you know about it? Is it growing, steady or declining? Then choose three or four franchises that fit the profile. When comparing franchises, make sure you gather as much information as possible, as you can never have enough. Ask about finance, fees, training and support.

Talking to existing franchisees is one of the best ways to gauge what being a franchisee will be like. Ask them the following questions:

• Are you profitable and making money?
• Have you recovered your investment?
• What training and support is provided?
• Have there been any unexpected costs or surprises?
• How would you describe your relationship with the franchisor?
• If you could go back in time, would you buy the franchise again?

The answers to these questions should give you a good insight into whether the franchise is right for you.

What should franchisors be looking for?

It can be very tempting in the early days for a franchisor to take a chance on someone it’s not sure about just to get the franchise fee and a franchisee on board. However, it’s a false economy and can have a negative effect on growth.

Remember that existing franchisees will be used as testimonials for prospective new franchisees. Bad franchisees will not only affect the growth of the network, but will also be difficult to manage and cause problems.

A franchisor must have a detailed profile of its ideal franchisee and should not waiver from it. It should include personal qualities, any specific skill set or qualification, experience, level of commitment, desired lifestyle, minimum level of investment, motivation and goals.

Remember, a franchisee’s motivation will probably not be the same as a franchisor’s. They may want to build a business to a certain level, they may want a lifestyle business, they may not be able to find a job, so want to be their own boss, or they may want to leave their job.

Take your time and take advice

This applies to both parties. Buying a franchise is probably one of the biggest investments you will ever make. It’s a big commitment. If you have any doubts, don’t do it. If everything stacks up, go for it.

Select your franchisees wisely, as it’s better to be safe than sorry. Seek advice from franchisees, franchisors, accountants, solicitors and consultants - it will be well worth it.