by Eric Parker

As a franchisor once you have your concept right and your franchise package in place you are now ready for the franchisee roll out.  The most important thing for a successful roll out is to select the right franchisees.  This is very important from both the franchisor and the franchisee.

From The Franchisor’s Point of View

You are on-licensing your brand name and concept to a third party in particular area, for a defined period of time.  You need to make sure they are going to run the business with the same pride and enthusiasm that you would have.

Here are Some Rules and Suggestions to Assist You:

  1. You want owner-operators as franchisees, not investors. If you have an investor that employs a manager, you might as well keep it as a company-owned outlet. Also, an investor will always side with his manager.
  2. The questions you ask in the interview. The potential franchisee really tries to impress you and answer a big yes to all your questions. Learn to ask indirect questions and not direct questions e.g. don’t ask them if they are prepared to work on the weekend – ask them what their hobbies and interests are? If they say they are a scratch golfer – they will be playing golf and not working on the weekends.
  3. We advise that you insist the potential franchisee completes Franchising Plus’ E test which will give you guidelines on their strengths and weaknesses. This will also assist you when you interview the franchisees. We suggest you ask them to pay for the E test, if they are prepared to pay for it, it shows they are committed.
  4. Do thorough reference checks e.g. past records, credit ratings, criminal records, etc.
  5. If possible, ask them to work in one of your outlets for a day. You will see how they adapt to your concept and interact with the staff and customers.
  6. Meet with their family and explain the potential risk they are taking and the extra effort and time restraints that will be required to get the business up and running.
  7. Make sure the potential franchisee has sufficient capital to pay for the franchise and additional working capital to carry the business until it reaches break-even.

From the Franchisee’s Point of View

You are about to invest your life savings in a concept.  You better make sure you will enjoy the business and make a really good return on your investment.  You are putting your life savings at risk so please be careful.

Here are Some Rules and Suggestions to Assist You:

  1. Make sure you have had experience in and/or will enjoy the category you have chosen e.g. If you are not good at I.T. you may not enjoy a franchise in that field.
  2. Check out how successful the franchise concept is, not all franchises are well tested and successful. Do your homework – talk to existing franchisees, suppliers, their bankers, etc. Unfortunately, there are some unethical franchisors ripping off franchisees.
  3. Make sure you have sufficient capital to purchase the franchise and working capital for you to reach break-even. This must include a salary for yourself.
  4. Don’t cut back on salaries and wages for your staff. Employ well-motivated staff and ensure they are well trained.
  5. Ensure you have the capital for marketing. You need good marketing in the early stages to get customer counts and trial up.
  6. Compile a good, slightly conservative business plan in place and set yourself realistic targets.
  7. Review the franchisor’s agreement and disclosure document and take advantage of the time to do this as per the CPA guidelines.

In Conclusion

The Franchisor/Franchisee relationship is like a marriage with a franchise agreement in place of an anti-nuptial contract.  This is a long term relationship with risks on both sides.  So, proceed with caution – the last thing we want is a DIVORCE