The Franchisor’s Biggest Mistake
Okay, so imagine for a minute that all the paperwork is done, your franchise structure has been created, money has been paid and you have been approved to award franchises (approval needed in registration states only). Congratulations!! Now what?
A majority of the time the Franchisor is impatient, does not want to waste any time and immediately begins to offer franchise opportunities. After all, the Franchisor has people waiting to buy one of these franchises. Makes sense, right? Wrong. In fact, attempting to award franchises immediately without some type of applicant qualification process is the biggest mistake a Franchisor can make and will cost tons of aggravation (not to mention money) in the years to come.
Too often I hear the stories, or get the call from businesses who have franchised their business, but are now frustrated that they cannot award any franchises. In most cases they have spent tons of money (using competitors) to franchise and were not given or even told about all the other pieces that are vital for franchising success. Some new franchisors are lucky and may award a few franchises over the course of time, but often find that the person or persons they awarded the franchise to either does not perform, does not care, is a chronic complainer and becomes a burden to the system. Often times these franchisees are terminated or pursue litigation, neither of which is good for any franchise system. You may have heard this before, “The success of a franchise system is the direct reflection of the success of each franchisee.” So, if you’re going to jump in bed with someone for five years, ten years or maybe longer, doesn’t it make sense to have a comprehensive way to approve applicants?
Approving applicants to operate a franchise is a process. Notice that throughout this article I refer to the franchisor as “awarding” franchises, not selling them. Yes, you are awarding a franchise to applicants that meet your criteria and pass your qualification process. First of all there are federal requirements a franchisor must follow such as: applicant must have signed a receipt dated when they receive the disclosure documents (collectively known as the “UFOC”), must have these agreements for a minimum of fourteen calendar days before any money is accepted and, if the franchise agreement is amended, they must have that new agreement for a minimum of seven calendar days, just to name a few. You’re not going to just pass out the UFOC to anyone who is interested in a franchise because this is a valuable document. Even though the UFOC does not have any proprietary or operational information in it you must control how and when it is given. Let’s not forget that if you just pass out the UFOC or accidentally pass it out to someone in a state that you are not registered in to offer franchises, the consequences are harsh. Needless to say you must have controls in place so such situations do not happen.
During this qualification process, there are things you should look for just as if you are about to hire an employee. Besides asking key questions throughout the process, some basic things should be part of a qualification process such as: running a criminal background check, social security number check and credit check. Not to mention, asking for references and actually calling them. You may even require that all applicants visit your corporate headquarters for a “Discovery Day.” This is simply an opportunity for applicants, at their cost, to come visit, view operations and meet the staff. It also gives you an opportunity to have a face-to-face meeting. You will be surprised at how many franchisors don’t even do these basics.
Diving into the qualification process even deeper, some of the most successful franchise systems require applicants take a personality profile test. You can use any personality test you feel will give you results or have one customized for you. We have an associate who creates proprietary personality assessment tests, which are centered on specific characteristics you identify as being essential for a person to succeed in operating your business model. Another valuable piece of the qualification process that could reveal information you may want to know about the applicant.
Aside from all of that, what type of questions are you going to ask and how do these questions transition into the next step of the qualification process. Keeping an applicant engaged throughout the process can be challenging. After they receive the huge UFOC document this is particularly the time most applicants loose interest or fall off. At some point the CEO/Founder of the franchise system should get introduced and conversation should take place. Again specific questions are asked throughout the process with the intent of understanding the applicant’s motives, personality, values and work ethic. The CEO/Founder just steps it up a notch.
Not every franchise system is perfect and you are not going to choose the “right” applicant every time, but by having a qualification process that is consistently applied to each applicant, you are minimizing the risk of bringing on a mistake that could cost you a fortune to reverse. By having a solid qualification process, you enhance your chances of awarding franchises to motivated and loyal individuals who have the drive to succeed, add validation to your franchise model and ultimately determine the success of your franchise system.
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