Franchising Your Business & What To Look For In Franchisees

Franchising your business can help you to achieve scale much quicker than you would otherwise be able to. It also means that you won’t have to raise as much debt and equity financing as if your business decided to go it alone. But, even if you’re sure that franchising is right for your business, how can you be sure that the franchisees that you choose are right for your business? This article takes a look at how you can screen your franchisees to ensure they don’t damage your brand and jeopardise your growth. The article focuses on franchising where the franchisee is a person, rather than a company, and they intend to take an active management position.

Creditworthiness

It’s important to ensure that your franchisee is creditworthy for two reasons. Firstly, it shows their willingness to fulfil their obligations historically, and could be a sign of how trustworthy they are. Secondly, you can use this information to check how likely it is that they are to be able to afford on-going payments they make towards to your business. You can also find out how much assets they have, and the degree of leverage they will be using to purchase the franchise. The more leverage, the more likely things could go wrong. However, just because things aren’t looking great historically, and they’re low on assets, doesn’t mean they can’t contribute. It’s about getting the mix right between prudence and flexibility.

Track-record

Although you are looking for a business partner, and not an employee, many of the rules are the same. If someone has a history of high job turnover, poor attendance, and long periods of unemployment then they are probably not the optimum candidate for a franchise opportunity. When you’re franchising your business, and you’re looking to get the best people in place, these are factors you should definitely consider. Another factor is their relevant experience for the job they will do. If you’re franchising a plumbing business, for example, then if the person has experience and qualifications in this area then that could work well. Management experience is something that’s not always necessary, but it can be important too.

Depending on the type of franchise you’re selling, it will usually be worthwhile doing a criminal background check, and other similar checks. 

Passion & Drive

It’s important that your franchisees are both passionate and driven. This will mean that they will drive higher revenues, you’ll get higher management fees, and they’ll be happier at their job. It also probably means they will contribute more towards your brand.

Most businesses know they want people like this, but finding them can be another matter altogether. Ensuring that you are disciplined in who you are willing to work with is the first step, and the second is encouraging franchisees yourself. The franchising manager should maintain a good dialogue with franchisees, and provide them with the support they need to remain highly determined to be successful. Ultimately, you and the franchisee both play an equally important role in their success.