Do’s and Don’ts when Investigating a Franchise

Greg Nathan, Franchise Relationships Institute

Business psychologist Greg Nathan is recognised internationally for his research into franchisee and franchisor performance. In this article he provides useful tips for franchisees during the recruitment process.

When searching for a suitable a franchise you will find that different franchisors will take different approaches to how they manage the process.

Companies with a well-known, successful brand can afford to be choosy as there will likely be a strong demand for their franchises.

Others with new concepts, or less well-known brands, will naturally attract fewer enquiries. This does not necessarily mean their franchise is less valuable. In fact, you may face less competition and enjoy better financial returns in a new concept.

However, there will be greater risks when you are dealing with a new franchisor with a less established concept. Ensure they have a pilot tested the concept thoroughly in their own company owned stores, and research the financial viability of the business carefully.

Ask about the recruitment process

When investigating a franchise, it is important to ask about the franchisor’s recruitment process and why they take this approach. You could ask, “Can you take me through your requirements for a prospective franchisee and how your recruitment process works?”

Most reputable franchisors will welcome your question as evidence you are an astute businessperson. However, if you get one of the following types of responses, be very cautious.

“Hang on a minute buddy, I ask the questions here!”

“Before I tell you, how much money have you got?”

“Well, if you like the concept, which I am sure you will because we have been inundated with people wanting to buy one of our franchises, we will get you into your own business as quickly as possible”.

Once you are satisfied the franchisor has a legitimate recruitment process, and you are comfortable with what you have heard about the company, you might choose to move to the next stage. This is like a courting process where you are getting to know each other to see if there is a good fit between your needs and expectations, and their requirements for a franchisee.

Imagine you are choosing a business partner

My advice is to treat the franchisee recruitment process as though you were choosing a business partner. Buying a franchise should not be like applying for a job or buying a product. You are entering into a long-term relationship which, if all goes well, will last for seven or more years.

If the recruitment process is rigorous, take this as a good sign. Resist the temptation to exaggerate your strengths or your assets, or to make yourself out to be something you are not. It’s best if the franchisor has a good understanding of your strengths and weaknesses so they can support you where you need it.

Remember, you will be fully responsible for what happens in the business. A franchise is not like a job where you can just walk away if you are not achieving the results that you expected. So it’s best if you and the franchisor both go into the relationship with eyes wide open.

As you work through the recruitment process, here are a few do’s and don’ts to keep in mind.

DO’S for dealing with a franchisor

DON’TS for dealing with a franchisor

Do give an accurate estimation of your financial position so the franchisor can help assess whether this is a realistic investment for you.

Do not exaggerate how much money you have. Being short of funds is a sure way to quickly get into financial difficulty.

Do give direct, factual and open answers to questions. Be yourself and say it like it is. If you are confused by a question or want to know its relevance, ask for clarification. The franchisor will respect your honesty.

Do not be vague or avoid responding to questions as this creates doubt in others. The franchisor will be asking specific questions for a reason. How you answer questions is just as important as what you say.

Do complete application forms thoroughly and honestly. Remember also the franchisor will be keeping this form on your file if you proceed and will be assuming what you write is the truth.

Do not leave sections blank, tell lies or make what you think are funny comments. These may be misinterpreted and what you put in the form may come back to haunt you if it is not true.

Before attending meetings or interviews do ask how they will be structured, if you should bring anyone or anything, and who from the franchisor will be in attendance.

Do not assume that you know what a meeting is going to be about or the issues that you will be covering. If you are caught by surprise you may come across as clumsy or incompetent.

Do come dressed in neat casual clothes and ensure you are well groomed. Treat the meeting as an informal business meeting. The franchisor will be looking at you as a possible representative of their brand so ensure you fit the image.

Do not come dressed like you are on holidays or overly formal. Franchisors may either think you are not taking the business opportunity seriously or that you don’t understand their brand.

Do cooperate with any assessment procedures such as structured interviews, panels, profiling questionnaires or reference checks. These will help the franchisor determine your strengths and weaknesses for coaching purposes.

Do not try to fake profiling questionnaires, hold back on giving referee information or try to make yourself out to be something you are not.

Do tell the franchise representative to back off if you feel they are pressuring you to make a decision before you have the answers to specific questions or concerns. Allow yourself time to adequately research the company and its existing franchisees.

Do not make decisions out of a sense of obligation, fear or excitement from something you have just seen or heard. Remember this is a long-term commitment that you will have to live with long after your emotions have settled down. And the person that sells you the franchise may not be around in the future.

A reputable franchisor, regardless of size, will always be looking for people with the qualities and commitment to implement its systems, look after its customers and help to build its brand. It will consequently treat the recruitment process with the care and consideration that it deserves. I encourage you to do the same.

 

Greg Nathan is Founder of the Franchise Relationships Institute and author of Profitable Partnerships, the world’s most popular book on how franchisors and franchisees can succeed together, available at www.franchiserelationships.com.