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Do You Really Know Your Prospective Franchisee?

  Sue McConnachie   |     Mar 07, 2024

Selecting the right candidates to represent your brand is critical to your operation’s ongoing success. These franchisees will be the face of your company and you need to trust that they will maintain your brand image. 

In fact, selecting the right franchisee, at the outset, can:

  • Minimize Franchisee failure and turnover, increasing success and profitability
  • Protect and develop good will for the brand
  • Reduce the number of resources used for dispute resolution and problem-solving
  • Allow more resources to go to business planning and management
  • Minimize exposure to legal liability for a franchisee’s wrongful conduct
  • Reduce exposure to legal claims launched by or against unsuccessful franchisees
  • Decrease legal and collection claims against delinquent franchisees

The first step in selecting the right candidate is defining what that candidate will look like. Similar to a job description you will want to create a profile that details the franchisee’s role. This should include what the role entails, the characteristics required to best represent your brand, a description of the work environment and a listing of what skills and abilities are necessary to own one of your franchises.

This profile will act as a set of criteria and will help ensure that your candidate is qualified from a personality and skill perspective. You will also want to ensure that your candidate is financially able to maintain the franchise, by confirming that they have the necessary capital and creditworthiness. The way you go about ensuring that your prospective franchisee meets these criteria is up to you but the process can include interviews, tests, behavioural profiles and a general review of their financials.

Once you have done all of this, you are ready to sign an agreement and start business, right?

Not quite.

While your candidate may appear to be ideal after a combination of structured interviews and relevant behavioral profiles, there could be information that they may not be revealing. It is important to go beyond the standard due diligence processes to confirm your applicant’s financial stability, assets and liabilities, background, and history of delinquent or criminal records. Doing so further eliminates risk and better enables your company and franchisees to succeed.

By looking deeper into your candidate’s background you can answer a lot of critical questions and reveal information that is often not obtained during the structured interview or behavioral profiling process. It is an enhancement to your due diligence process, which will assist you in choosing the right franchisee.

Through the course of investigation, many types of pertinent information can be discovered. Some examples of derogatory information include: criminal record history, poor credit history, failed business ventures, discrepancies in information reported on franchise application, bankruptcy history, legal action and judgment records.

Franchisors have an absolute right to conduct lawful franchisee screening in order to choose the best candidate. It is crucial to your company’s success and will help you reduce the risk of failure and decrease turnover. Ultimately, by being more thorough and investing additional resources into your screening process, you can reduce your overall expenses and increase your profitability.


By Sue McConnachie

 Tags: Franchising

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