Running a franchise may not sound romantic, but it does involve a degree of match-making. Pairing a would-be franchisee with a franchisor isn’t a straightforward process, and, if handled badly, can lead to heartbreak – or a struggling business, at least.
Franchisors are picky when it comes to choosing their partners, and many complain they can’t find decent applicants when they’re looking to recruit. More than half of franchise systems say a lack of suitable franchisees is a major barrier to their business’s growth. So, what are franchise bosses looking for in a new franchisee? And what makes a less-than-perfect mate?
Show me the money
A basic qualification for franchise ownership is having enough money for the necessary investment. The costs of buying in to a franchise operation vary hugely, with the mean start-up investment for a property services business, for example, being £52,000, research from the British Franchise Association (BFA) shows. However, sums soon rise in other sectors, with £86,000 being the mean amount for a retailing opportunity, and a hefty £111,000 for a franchise in the hotel and catering field.
- Almost seven out of ten franchise applicants fail because they have insufficient capital, the BFA study shows.
To make it through the first stage of the recruitment process, aspiring entrepreneurs must undertake proper financial research into a franchise to establish how much they need to put in. Consulting an accountant is wise, preferably one with specialist franchising knowledge, to prepare a statement of personal net worth, how any supplementary financing will be found, plus a plan outlining how the business might be grown.
Whether all of the funds come from personal savings, a bank loan, borrowing from alternative lenders, or a combination of these, franchisees must demonstrate they can raise the capital required if they want to get the green light. Plus, they’ll need further reserves to keep themselves afloat in the early days before the business turns a profit.
It’s about attitude, and aptitude
Another major bugbear of those recruiting for franchise systems is many people have little idea of what running a franchise involves. Their mindset just isn’t right. Either they’re not dynamic enough, don’t understand what the business is about, or expect their hand to be held throughout.
- People viewing a franchise as a job rather than running their own business is the third most common reason franchisors turn down would-be franchisees.
- Applicants’ lack of business acumen is cited as an issue in 56 per cent of cases.
A franchise is a stand-alone business, even if it does have the back-up of the parent group. Successful franchisees will share many traits with independent business owners – leadership skills, the ability to manage, determination, and lots of enthusiasm. Yet, experience in the corporate world can still be helpful, bringing as it does management experience, and the knowledge of what it’s like to work under the ultimate direction of a bigger entity. The parent franchise will have a set of rules all investors must follow, after all. One in four new franchisees has a background in the industry a franchise works in, so previous job roles do count. And, conversely, almost a third of franchising recruiters reject an applicant because they have no sector experience. But those hoping to run a franchise unit still need an independence of spirit, and an entrepreneurial streak, as well as being able to show an understanding of what the franchisor needs, and how it operates.
Any franchisor wants to be confident an individual ‘gets’ what the business is about. Of course, they’ll expect a potential recruit to have done their research – franchisors want to recruit people to run a flourishing, and profitable operation. But what sets the top tier of franchise candidates apart is a genuine spark of excitement about the goods or services being offered, and a sense of real confidence. A little of the right kind of positive attitude will go a long way.
The right skills may not be what you think
Every franchise system has its own checklist of must-have qualities for the individuals it brings on board, and we’ve said previous industry experience may be a requirement. Some hairdressing franchises, for example, insist the person running a salon is a qualified hairdresser. But, others take the opposite view, and want someone without experience who can make management, customer service, and sales the focus, then hire in specialist talent. This is sometimes found in fast food franchises, too, where franchisors take the view that someone without a background in the restaurant industry is going to be easier to train in their particular organisation’s ways, and procedures.
However, some skills are universally desirable. Proficiency in sales and marketing is a necessary ingredient in the franchising mix, as are good communication skills, and most franchisors are actively seeking recruits with evident ability in these areas.
- Almost 40 per cent of franchisors have rejected an applicant because they had little or no sales and marketing experience.
To test candidates’ skills in practice, many franchise outfits expect applicants to work as employees on the shop floor as part of the selection process – pizza chain Domino’s, and McDonald’s are keen on this hands-on approach. Equally, filling out franchise forms, taking personality tests, and going through the often arduous interview process can be tough, time-consuming, and very revealing about an individual’s determination, and ability to run a business. Again, research, and preparation, including talking to existing franchisees, is essential for those who want to succeed.
In summary, the perfect franchisee is a winning mix of enterprising attitude, business know-how, alongside an ability to follow basic rules. It’s a slightly contradictory combination, and some individuals veer too much in one direction. If they’re extremely entrepreneurial, they may be better off going it alone. If they prefer always following instructions, they may be suited to staying as an employee. That’s what makes the courting period between franchisor and potential franchisee so important. But the character who fits the franchising bill can find it’s a great way to run a business, and to control their own destiny. And when they make the right connection with a franchising group, it can result in a lasting match made in heaven.
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