What is the cost of poor franchisee recruitment?

By James Young | 11 Dec 2019 View comments

What does it cost to get franchisee recruitment wrong? The answer is A LOT.

At its most extreme, a franchise recruitment decision gone wrong, can cost a franchise system its whole existence. If you let the wrong franchisees join your system, your business could end up being in a world of trouble.

Much like hiring someone to fill a job position, allowing a new franchisee to join your network requires a lengthy process to determine if the candidate is the right fit, if they possess the relevant skills and knowledge, and if they have the required experience to take on the role or in this case – the ability to own and operate a franchise business.

The value of a great franchisee

Franchise ownership requires an interesting and unique mindset and skill set.

Unlike small business ownership which requires a bucket load of entrepreneurial thirst, the franchise industry needs people who can follow systems, work within a framework or manual process and excel in a team environment. They own and operate the business and need to be a leader while driving their own business performance but within the parameters of the franchise system. 

Recruiting franchisees should follow a systematic process that clearly identifies the characteristics and strengths of the candidate, ensuring that they match the franchisee profile defined in your business expansion plans.

Moreover, allowing the wrong people to buy and invest into your franchise system can affect a number of aspects of your business such as; customer experience, profits and culture, as well as your network performance (which in turn reduces the appeal of your franchise offer) and could put a young or existing franchise system into a tailspin. 

Investing in franchise recruitment

When you think of the recruitment process in its entirety, just the time, resources and financial investment dedicated to sourcing potential candidates already constitute a large (and costly) project in itself.

It is paramount to ensure that the setup and post-application process is tailored to your brand and maximises all opportunities. That means the right people are taken along the necessary recruitment steps and only the best potential franchisees are given an opportunity to join the network. 

Whether you’re part of a small or large organisation, having a pre-approval process will prevent wasting time, resources and money on anyone that’s not quite the right fit or qualified for the position.

Think of someone getting to the ‘meet the founders’ stage as an exclusive opportunity and only pre-approved candidates who have completed all of the necessary qualification steps should have this interaction. This will protect the founders time and ensure that only the best candidates are put forward to become franchisees.

What’s at stake if recruitment goes wrong?

If these key criteria and stages are not implemented and followed, you could find yourself (and the business) in all sorts of down-hill situations, including legal disputes, mediation or early-exits.

As part of building your franchise network, you want your franchisees to be happy and successful – contributing to the network and brand in a positive way.

Disgruntled or unhappy franchisees could tarnish your reputation, especially when franchisees start speaking to other franchisees within the network – which could also affect your current locations and potential for future growth.

And by not having a franchisee who is adding value to your network you are also missing out on an essential ingredient to a successful franchise network.

The difference between a quality franchisee running a location versus the wrong franchisee is bigger than you may think.

After 17 years in the franchise industry working with DC Strategy, I have seen top-performing franchise locations being run into the ground with the wrong leader and I have also seen struggling businesses thrive under new, correctly-recruited franchise partners in almost every industry.

If you extrapolate the difference of a ‘good’ verse a ‘poor’ franchisee’s performance across a whole network, the cost to the bottom line of a franchise system could be many hundreds of thousands of dollars and therefore potentially millions of dollars left on the table when prospective network buyers are looking at your network.

Franchise business owners need to be leaders within their own business and connect strongly to their local communities. They need to be hungry to succeed and possess the ability to hit the ground running – especially if they want to see a return on their investment and benefit from business profits – key factors when finding and recruiting franchisees.

By the same token, your business and investment are also at stake when recruiting franchisees, so ensuring that the right people join your franchise network is going to help you in the long run and keep you focused on the business as a whole.