“Franchising is also an established business model: the majority (62 per cent) of franchises are established brands that have been operating in Canada for at least 11 years, and 30 percent of franchises have been operating for more than 25 years. Franchisees also have a record of success, with 50 per cent of franchisees having a tenure of more than 10 years with the same franchise brand.” Canadian Franchise Association’s Advocacy Survey, 2017.
When you are launching a franchise, or extending and growing an established franchise business, you want to do everything you can to ensure success and the longevity of your enterprise. While the Canadian Franchise Association’s Advocacy Survey found 50% of franchisees were running their business for more than 10 years, many businesses do not make it to that mark.
To reduce risk and better align a franchise for success, many franchisors have begun using more sophisticated approaches when it comes to franchise development and the selection of franchisees.
Using comprehensive financial screening techniques, successful franchise systems, such as Wendy’s and Mary Brown’s, have been able to maximize their franchisees' success, resulting in greater overall success for the companies themselves.
This is because enhanced financial screening ensures that the franchisees you choose are of the highest caliber and will be able to take on the responsibilities of representing your brand.
By using thorough financial screening to select the right franchisee, you can enjoy a number of benefits:
1 - Minimizing Franchisee failure and turnover
Selecting the wrong franchisee can result in franchise failure and high franchisee turnover. This can be costly and have a negative impact on your brand.
By taking advantage of enhanced financial screening, you can obtain the most in-depth and up-to-date information about your applicants to ensure you make the best decision possible.
This will minimize, if not eliminate, the likelihood of selecting a franchisee that is not prepared to take on all of the responsibilities associated with running one of your franchises, from financial stability to their management abilities. As a result, you and your franchisee will gain greater success and profitability.
2 - Protecting and developing good will for the brand
Your franchisee is a representative of your brand. The way they carry themselves, run a business and treat their customers and community has a direct correlation with how the general public perceives your brand.
By ensuring that you have selected the best possible franchisee, you can make certain your brand's reputation remains untarnished and that your representatives are the best possible depiction of your brand and what it symbolizes.
3 - Minimizing exposure to legal liability for a franchisee’s wrongful conduct
If a franchisee does do something that reflects negatively on your company, and someone steps forward, it could take a lot of time, money and energy to minimize its effects.
By selecting the right franchisee the first time, you can help ensure that your resources are dedicated to business planning and management in lieu of dispute resolution and problem-solving.
4 - Reducing exposure to legal claims launched by or against unsuccessful franchisees
Sometimes you may be forced to take action against your franchisee for misconduct, misuse of property, misrepresentation of your brand or any other number of reasons. In addition, franchisees will sometimes feel that something is owed to them, taking you to court for actions you may or may not have performed.
By selecting a franchisee who has the skills and background to manage your franchise, you can minimize the likelihood of going to court over an otherwise avoidable reason. Similar to the above example, this will also allow you to better use your resources.
At the end of the day, investing in enhanced financial screening will ensure you obtain the most valuable information about potential franchisees so that you can make the best decision possible when it comes to your business and brand.
While a strong financial position is key, determining whether your applicant is reliable, capable and a positive representation of your brand is also important.
At Quality Credit Reporting, we can help you obtain and analyze the most in-depth and up-to-date information available so that you can make the most well-advised decision when it comes to selecting a franchisee.
Tags: Franchising
