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There’s no doubt that finding (or rather having a franchisee find you), screening and selecting franchisees is one of the most difficult tasks facing franchisors in today’s market. During such times, it pays to go back to the fundamentals and ensure your recruitment and selection process is first class.
Perhaps marketing is a little off-topic, however, it deserves a mention here as it is, potentially, the most important element in any recruitment process. Over the last few years, there has been a steady increase in the number of leads flowing from non-traditional advertising media. Today, social media, second tier television advertising,radio as well as traditional forms of advertising are becoming more and more cost effective. The problem is, many franchisors keep on doing the same old things and wonder why the number of leads they are receiving has dried up.
In the USA, the traditional forms of advertising have shifted to include the expanding social media domain. Blogging, press releases, Facebook pages and the like are all proving to be useful tools in generating leads. Here, we have seen some franchisors have great success through these newer forms of advertising. In fact, one franchise system using second tier television (i.e. the new digitalchannels) has generated significant interest in its offer ñ but not only from people who were already in the market for a franchise. This franchisor has generated significant interest from people who saw the advertisement and were subsequently prompted to consider franchising as a future.
The key point here is that franchisors should be reviewing their marketing plans and activities for relevance and effectiveness.
At the earliest possibility franchisors should be attempting to fully understand the candidates financial capacity and their expectations. This is a critical exercise and one which many new franchisors are unwilling to explore as rigorously as they might.
Operating on the assumption that a franchisor will convert approximately two to five per cent of enquiries to signings, there is a 95 per cent chance that any given franchisee is unsuitable for the network. Franchisors need to find this out as early as possible in the recruitment process. Otherwise, they risk wasting their own time and the candidatesí time also.
Questions that should be covered in the earliest telephone conversation are issues such as the amount of money the franchisee is willing to invest and whether or not the franchisee has that amount of money available. This doesn’t have to be done brutally, it can be done with some sensitivity, but it must be done.
Otherwise, it will rear its ugly head later in the process by which time you have spent considerable time and effort for no gain. You only want to deal with people who are willing to invest the necessary capital and who have that readily available (other funding sources considered).
Many franchisors have an interesting way of describing franchisee candidates by saying, he is a good franchisee but he doesnít have the money. Actually, he’s not a good franchisee at all – he doesnít have the money. Being very clear on this issue will save time and money in the long run.
Perhaps the most critical issue in any partnership arrangement (not to be confused with a legal partnership) is that of fit. Whether it is a franchisee/franchisor relationship or an employee/ employer relationship, the issue of fit is more critical than most franchisors would realise.
Many franchisors tend to assess this critical issue of ‘fit’ on a very subjective basis and in some cases that may be appropriate. However, it is possible to bring some rigor and robustness to that assessment.
Every franchisor should have a checklist of characteristics and attributes against which potential franchisees should be assessed. These should, at least, be classified into the ‘must haves’, ‘nice to haves’ and ‘bonuses’. In our experience, very few franchisors have taken the time to develop this type of evaluation process. Instead, they tend to rely on gut feel and hope that the candidate will turn out to be a good franchisee.
Of primary concern to every franchisor is the issue of passion ñ is the franchisee simply going through the motions to achieve a desired financial outcome or are they truly passionate about the franchisorís business? Have they used the franchisorís products or services? How often? Why are they passionate about the business?
It would come as no surprise to many franchisors to say they should seek franchisees with a passion for the business ñ not simply those desiring a certain financial outcome.
This is a critical issue for both franchisee and franchisor. The franchisor should be concerned about family support in two ways. Firstly, has the franchisee got the support of their family? This is undoubtedly one of the most important issues to investigate. Franchisees who have to spend time away from their families on traditional family holidays (say Easter, Christmas, Father’s Day, Mother’s Day, etc) and who don’t have
the understanding and support of their partner and family face a difficult situation.
Without this type of support, the family situation will bring pressure to bear on the franchisee which, in turn, will almost certainly result in some areas of the business being neglected or at least overlooked.
Similarly, the franchisor should also be concerned with the provision the franchisee is making to ensure their home life doesnít suffer. Franchisors should be asking how franchisees intend to manage these situations to minimise disruption to both the family and the business.
Franchisors should seek franchisees who have the support of their families and who have thought and planned carefully to minimise the impact of the business on family life.
Just as an employer should conduct reference checks and the like, so should a franchisor. The franchisor should seek to know as much about a franchisee as possible.
Here, reference checks are a must. However, reference checks are often cursory and conducted with little planning. Each franchisor should be establishing a standard reference check questionnaire to which specific concerns might be added for individual franchisees. This will help ensure the franchisor gets the most out of the reference checks. Donít fall into the trap of asking the same old superficial questions – drill deep to find out as much as you can from these critical sources.
It is also just as important to conduct police and credit checks on every candidate who progresses to a certain level in the recruitment process. These are easily obtained and cost very little but can reveal a great wealth of information (particularly the credit check).
Here, franchisors should be seeking franchisees whose references and other checks are consistent with the way the franchisee has presented them. A negative entry on a credit check shouldn’t necessarily be viewed poorly by the franchisor. There might be a rational explanation for the event or incident.
However, franchisors should be concerned if the franchisee has concealed any critical information. Why? What does this say about the franchisee? Actually, the most prudent candidates will have already obtained their own credit and police checks so they know precisely what those reports will say.
The credit check can also reveal a great deal about the franchiseeís ability to handle money with prudence and care. Examine the report carefully. Franchisors should be looking to see if there have been any defaults (of any type) or if the candidate has entered into any payment arrangements (which, unfortunately, are not often reported). These checks should be conducted on any person who will be a signatory to the franchise agreement (including the guarantor).
In any recruitment process, one side typically drives the other. Often in the employment situation, the prospective employee tries to drive the process and is the most eager to proceed.
Franchisors should be seeking franchisees wanting to proceed in a reasonably quick time- frame, but not at the expense of proper due diligence. Franchisors should be testing the franchisee to fully understand the due diligence process the franchisee is undertaking.
Here, franchisors would be well advised to avoid those candidates who seem unwilling or unable to conduct robust investigations ñ it is these types of people who often wind up having unrealistic expectations about the business. It would be better to focus on those who are more demanding and inquisitive.
Some of the key ways in which franchisees signal their willingness to undertake the necessary due diligence are the speed with which they schedule meetings, engagement of accounting and legal advisors and the like. Be wary of candidates who donít want to engage good quality advisors. In fact, if a candidate is unwilling to engage a specialist legal advisor, the franchisor ought to run, and run quickly. If a candidate is not willing to invest in this critical matter what will they be willing to invest in?
Franchisors should seek candidates who undertake the due diligence process responsibly and prudently.
At the end of the day, the recruitment of a franchisee can be something of a toss of a coin. However, the franchisor can do a great deal to move the odds to their own favour. Focusing on candidates who follow good process, are passionate, open and honest, have the right background and who genuinely have the support of their families will bode well for most franchisors.
For more than 20 years David Stafford has worked in key management roles and as a strategic advisor with leading organisations in Europe, Asia and North and South America. Covering a range of industries, sectors and businesses, David has worked with TXU, Telstra, Dulux, Bankwest, Repco and UTS, leaving an outstanding legacy of achievement.
DC Strategy is your business growth specialist. For more information in relation to franchising, contact:
David Stafford
Executive Consultant
david.stafford@dcstrategy.com
03 9615 7207
