5.1 Preliminary Screening & Data Collection

The franchisor/franchisee relationship is more than a legally binding one. This is a professional relationship that has the potential to last years, even decades, so the importance of the selection process cannot be understated. Before you disclose, which is to say, before you offer your Franchise Disclosure Document, you need to make sure you know who you’re giving it to. Some general questions to ask:

Are they financially qualified?

• The number one reason small business owners fail is because of a lack of working capital. Prospective franchisees who do not meet the minimum financial requirements set forth in the FDD should not be disclosed, unless they have given significant evidence of available secondary funding should the need arise. The last thing you want to do is set someone up to fail. You can mention to a candidate that loans, rollovers and buying assistance are available and that they should do their personal research and inquire to see what they are applicable for and what would best suit them. Ask your Client Relations Manager for funding referrals if needed.

Do they have experience in the appropriate field, or at least possess the professional qualities you seek?

• New franchisees should come to training with a reasonable amount of general knowledge to run the business, which will differ greatly depending on the industry. For example, having a licensing requirement for a plumbing franchise is different than needing a general understanding of customer service in a retail environment.
• Some franchisors require licenses to be held by the franchisee. Others permit them to “borrow” from a broker. Others allow a hired manager to be the one licensed. Whatever it might be, have all options determined from the start, because what you allow for one franchisee, you’ll have to allow for all franchisees.

Are they interested in the type of franchise ownership you are offering? Single unit owner-operator, multi-unit developer, or area representative?

• Candidates often already have a mental picture of themselves and their ideal day to day work life; it’s vital that they align with the model you’ve designed that will make you both successful. Compromising on this to just get a franchise sale can be detrimental.
• For new franchisors, it may be better to start small to make sure you can offer optimal support to your first franchisees. Thriving franchisees are your best resource during the validation process of prospects. Many emerging brands start growing with single unit owner-operator models then graduate to additional offerings. If starting out with multi-unit or area representative opportunities, make sure you are prepared for franchise owners to grow at a rate equal to or faster than your own. Are you ready to grow at a speed that you’ll have less control over? In other words, is the pond deep enough for more than one big fish?
• For more detailed information regarding different kinds of offerings, refer back to Chapter 1.

Where are they planning to operate their franchise unit? Is it in a location that is feasible to offer appropriate franchise support and growth potential?

• In addition to basing target markets on market research to support the business, a good franchisor will choose geographic locations where they can be available for onsite support when needed. Therefore, targeting new franchisees within “arms reach” to start is recommended. As you’ve read in Chapter 2, selling throughout each state will get pricey; so starting in non-registration states or only filing in your closets (or best demographic) registration states would serve better in your wallet for the beginning stages of growth.

Do they align with your franchise’s culture or overall philosophy of doing business?

• This may be the most important consideration of them all. Even if you’re a work from home model, franchising is a “people business.” In addition to entering a long-term relationship, you must trust your franchisee to carry through your business and brand philosophy to customers, employees, vendors, contractors, and others. It’s your name on the door, protect it with a franchisee who wholeheartedly believes in your business, someone who will be your best cheerleader or mascot.

As a franchisor, you should be enthusiastic about a franchise candidate. This is the time to feel confident that they are preliminarily qualified to run the business, in a desirable geographic market, with a shared professional vision for your brand.

Much of the recruitment process is commonly metaphorically compared to dating or marriage. With dating, you and the other partner want to be sure that both parties like each other inside and out before continuing in a relationship together – like dating, or in our case candidate qualifying, it needs to be remembered that this is a two-way street, the candidate needs to like you as much as you like them to have a successful and long-lasting relationship together.

Preliminary screening is the first step to comfortably disclose a franchise prospect and approve them to the next level of the franchise awarding process. Later, or at a time of your choosing, you may decide to vet a candidate even further by way of credit check, criminal background check, personality testing, etc. If you do not already have a Candidate Information Form, reach out to your Client Relations Team to brainstorm on creating your own.

A franchise sales process will look different for every franchisor, it will be more or less detailed depending on your offering, operation style, industry, etc. Many of the steps a candidate will go through will have sub-steps for both them and the salesperson. A typical sales process will resemble the following (an in-depth breakdown of the sales process can be found in Chapter 4):

1. Pre-Discovery/Qualification
2. Discovery/FDD Review
3. Validation
4. Discovery or Meet the Team Day
5. Agreement Signing/Closing

You may be wondering why there are so many steps? If a candidate has the money and is ready to launch a franchise, why not just give them the keys? Awarding a franchise is not a decision to make lightly, or because you need that franchise fee check to make payroll. Back to the dating metaphor, Dating 101, you don’t move-in together on the first date nor do you walk down the aisle on the second date; so take the time needed to make sure this franchisor franchisee marriage will not end in divorce.

It is true, a franchise agreement contains strict language that enables franchisors to remove franchisees from their network when they don’t abide by the agreement. However, if somebody wants to remain a franchisee and they keep paying their royalties, it’s tough to get rid of them. A bad franchisee in the system can do a lot of damage. Franchisees create a reputation for your brand, good or bad. They are someone future candidates will call to validate the business. In the end, failing to vet a prospect properly and thoroughly for franchise selection can cost exponentially more than the franchise fee they are handing you the day they sign.

The number one reason new franchisors fail is because they pick the wrong franchisee. The right franchisee, however, can bring growth to your brand, positivity to your work culture, even lifelong friendship to you and your organization. Choose wisely because the choice is yours!