Franchising is an excellent way to grow your company, but if done incorrectly, can have detrimental effects on your brand, your business and your bottom line. The Covid-19 pandemic has made financial screening for the prospective franchisees even more vital, in a time of economic instability, as the search for new franchisees to replace failed franchises begins.
Taking the time to thoroughly screen your franchisee candidates is critical to any franchisor’s success. Without a comprehensive screening process, you will quickly see your resources move from business growth and planning, to quality control, dispute management, and perhaps even litigation.
Doing so will help you to confirm your applicant’s financial stability and background as well as obtaining the answers to these other key questions:
Has my candidate been truthful on their franchise application?
Are they financially capable of maintaining the franchise?
Do they have the financial stability to operate the franchise?
What are their assets and liabilities?
Have they had other failed business ventures?
Do they have a history of delinquent payments, legal actions or judgments?
Do they have criminal records?
Have they had negative media coverage?
By answering these questions, you can help ensure your franchisee’s ongoing success in several ways.
Confirmation of Assets
Confirmation of Liabilities
Derogatory Credit Information
Current Employment & Income
False Application Check
By implementing an enhanced screening and due diligence process, you can help mitigate these potential risks.
Your franchise system is dependent on the success of your franchisees. If there is a high rate of failure and turnover, it will not only affect your customers, but will reduce the number of qualified and desirable prospective franchisees drawn to your brand and eventually your profitability.
By ensuring you partner with franchisees that have a high likelihood of success, you can better ensure the success of your entire company.