The good, the bad and the ugly on choosing franchisees

If you are starting a new franchise chain, how can you ensure you choose the best people to represent your franchise?

If your franchise is well developed, how do you ensure you continue to recruit the best franchisees?

There is no doubt good franchisees make a good franchise chain and bad franchisees destroy a franchise. Readers should bear in mind that after 10 years, two-thirds of franchises will no longer be in business. Is this due to a bad product or service or bad franchisees? The answer is generally that it is due to both.

While a franchisor will occasionally make mistakes, here are some general rules. The first being whether or not the potential franchisee has what it takes to be his or her own boss.

Here are some points a franchisor should make to potential franchisees and questions that should be asked:

First, the franchisors should tell the potential franchisee that there are no guarantees in business. The best franchises can’t eliminate all the risks associated with starting a small business.

Aspiring franchisees should start by evaluating their strengths and weaknesses as potential owners and managers of a small business. If they want to be their own boss, they need to ask themselves the following questions and prove to the franchisor they have what takes: Am I a self-starter? Can I develop projects, organise my time, and follow through on details?

How well do I get along with different personalities? Can I develop working relationships with a variety of people including customers, suppliers, staff, bankers and professionals such as solicitors, accountants and consultants? Can I deal with a demanding client, an unreliable supplier or a difficult receptionist if my business interests demand it?

How good am I at making decisions – often quickly, independently, and under pressure?

Do I have the physical and emotional stamina to run a business?

Can I work 12 hour days six or seven days a week?

How well do I plan and organise? Do I know how to manage cash flow?

Is my drive strong enough? Can I handle running a business emotionally? Will I burn out carrying the responsibility for the success of my business on my shoulders?

How will the business affect my family? Will my family trust and support me in the difficult, early years of my business years. Will family members work in the business with me? Can my family adjust to a lower standard of living or putting our family assets at risk in the short-term?

If these questions are answered satisfactorily, the applicant should be considered as a franchisee.

In McDonald’s, a potential franchisees works as a casual in a franchise for about 10 months, giving both McDonald’s and the franchisee the opportunity to evaluate each other.

If a potential franchisee working in a franchise is not a viable option, then he or she needs to be carefully evaluated during the training period. Arrangements should be made under the franchise code as to what monies will be refunded to the franchisee.

In my opinion, a potential franchisee to avoid is recently retrenched executive aged 50+ who is looking for something to do with retrenchment funds. The retrenched executive is generally bitter about his retrenchment, doesn’t know much about running a small business and, after a time, will probably think he or she knows more about the franchised business than the franchisor.

The ideal franchisee is 25 to 35, generally doesn’t have enough money to fund the franchise (that’s what family is for) and is keen to prove something.

Better selection makes franchises better.

Howard Bellin established IF International in 1969 as a one man franchise consulting organisation. Today, IF is a specialist marketing channel strategy practice which works with Fortune 500 size companies throughout the world.