Selecting Franchisees

In the last issue, I talked about franchisor selection for the potential franchisees. This round I will be focusing more on the franchisors and discuss about franchisees selection. Again I would like to say again that people have choices in life. And, if to setup a store, there is a saying that it is all about location, location and location, I would like to put it that in building a franchise network for the franchisor, it is about selection, selection and selection.

I know that many franchisors go into franchising to make more money. This is not wrong because after all business is all about making more money. However, if the franchisor accept franchisees just because they can pay the franchise fee, then this is very wrong. Allow me to use this metaphor, if all the men in this world is only looking for beautiful girls and women to be their girlfriend and wife, wouldn’t this world be a sad place? Reason being, not all men can live with beautiful girls and women just because of their beauty. Vice-versa is also true. There has to be some other understanding as well. Otherwise arguments and conflicts will be day-to-day affairs and there will not be a peaceful place in this world. Please don’t get me wrong here, I am not saying that beautiful girls and women are not girlfriend and wife material but I am merely stating that there are more than just the looks. To cruelly put, businessman who accept all franchisees only because they can pay the franchise fee is just like prostituting their business.

It is beyond the money. Of course the potential franchisee has to have the money to invest in the franchisee business or at least know how and where to get the money to invest in the franchise business. One of the most important things to look for in a new franchisee is always compliance. You as a franchisor, have built up the business and the brand and have now go into franchising to allow other people to use your system and brand. If the franchisee is not compliance, the franchisee can turn all your efforts upside down in no time. For example, if you have established your brand as one that serves healthy food, all of a sudden comes a new franchisee that does not follow the system and serves the fastest but not well cook food in town, what will happen to the whole image of your brand and your business?

The attitude as a team player cannot be discounted at all in the franchise network. All franchisees maybe independent business owners who is accountable for their own profit and loss but they will also have to know that preserving the interest of the franchise network is important. A franchisee cannot put other fellow franchisees in a difficult and risky situation just for the sake of them earning a little bit more for themselves. Franchisees should be able to contribute constructively for the benefit of all members in the network. The most common human nature of selfish and greed has to be minimised in a franchise network.

A franchisor should also ensure the selected franchisees are self-motivated in the running of the business. Franchisor should know that practically they cannot be there for the franchisees all the time in facing every situation. A self-motivated franchisee will have a positive attitude and will be less likely to blame others if things do not go well. This is at times the thing that keeps the business going especially when things do not turn out as expected or as planned. Regardless of knowledge and experience, motivation and willingness to learn is very important and can overcome many other obstacles.

While franchisees must have the mentality of a business person, they should also have the heart of a sales person. Franchisor do not need a super sales person as a franchisee but a franchisee that is able to sell and enthusiastic about the business and its sales. This is important to both the franchisee and franchisor. For the franchisee, sales will determine the survivor of the business. Without the revenue, the company will be affected and soon the franchisee will not be able to cover its overhead and will have to go burst. This will reflect badly on the franchisor as well. For the franchisor, this can be an opportunity cost. Many franchisors practise the awarding of territory rights to the franchisees. If the franchisee is not performing well, it deprives the franchisor from maximising the loyalty earning and the franchisor cannot appoint a new franchisee or open a new outlet in the same area for at least in the near future.

Hardcore salesmen are not welcome here. This statement might sound contradicting with the above but a franchisor cannot accept a potential franchisee that is trying to hard sell themselves to get into the network. Accepting a potential franchisee that is overselling themselves will turn out to be disastrous for the franchisor. The potential franchisee might praise the standard operating procedure and promise full adherence to it but they might not be truthful enough and just want to get in to take advantage of the brand recognition. So, franchisors have to be careful with this type of applicants and this sometimes requires the “sixth sense” to tell if the applicant is truthful or not.

Setting expectations prior to approving a franchisee is an important task. While this does not sound like a criterion in selecting a franchisee, it is in fact, part of the evaluation on whether the franchisee can accept the culture and the value of the network or not. It is also an evaluation of what are the values a potential franchisee holds. Even before the first engagement for discussion on the potential franchise relationship, both franchisor and potential franchisee have their own expectations on the franchise system. The expectations from the franchisor normally cannot be changed all the time in the interest of all other existing franchisee but it is whether the potential franchisee can adjust their expectations to fit into the network or not. A good communication of the expectations are vital can ensure that there will be lesser problem in the future.

What is important in the franchisee selection is actually to maintain the harmonious environment in the network. The selected franchisee should be able to work together with the franchisor and also with other franchisee and understand the spirit of franchising. This is so that the franchisor and other franchisee can concentrate in growing the business rather than spending too much time arguing minor matters which is unproductive. Petty issues can sometimes take a lot of time and effort to resolve.

Till the next issue on ‘Challenges in Franchise’, I’m signing off for now from the side of the pool in Port Dickson.

This article was first published in Business for Sale Magazine Issue No. 25 Mar/Apr 2012

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