Selecting franchisees

Most franchisors rate franchise recruitment as the most critical decision in franchising. The length and interdependence of the franchise relationship will magnify the effect on the franchisor of a poor recruitment decision. A poor recruitment decision will be reflected in greater franchisor administration and support costs and, possibly, even in the costs of a dispute or litigation if the franchisee’s business is not successful.

One of the greatest challenges for a franchisor is to reject the franchisee applicant who has the financial resources to proceed, but does not meet the franchisor’s objective criteria. A similar challenge is presented by the franchisee applicant that meets the objective criteria, but does not have the financial resources and will be more prone to early failure due to under-capitalisation.

The franchisor must have developed a clear profile of the franchisee it is seeking to recruit and should avoid compromising on the core elements when assessing candidates. Ultimately, slower development with the right franchisees will lead to a more successful system that rapid development where appropriate recruitment disciplines are sacrificed for rapid growth.

There are a number of ways to inform potential franchisees of a franchise opportunity. Newspaper advertisements are the most popular means, but advertisements in a franchising directory or recruiting through franchise consultants are also popular. Often, franchisors will use multiple methods.

It is not uncommon for franchisors to receive large numbers of franchise applications or expressions of interest. Franchisors must carefully manage the application and selection process, weeding out the genuine and worthy applications from the remainder in a way which is effective and efficient. A franchisor normally cannot interview every applicant.

Typically, a franchisor will have some preliminary information concerning the franchise which it will provide to anyone who expresses interest. More detailed or specific information is normally not provided until at least a preliminary application form is provided by the franchisee. Sometimes a small deposit is requested by the franchisor with the application form.

An applicant will want to know as much as possible about the franchise system and any particular franchise opportunity. Similarly, the franchisor will want to discover as much as possible about the franchisee. The evaluation process needs to be carefully structured to avoid problems should any applicant not meet the franchisor’s criteria or decide, for whatever reason, not to proceed.

There is more information available regarding Franchise Council of Australia is a not for profit membership organisation that is the peak body representing the franchising sector in Australia.