Franchising is a great way to quickly expand a business without taking on enormous debts. The franchisee takes on most of the financial risk, as well as much of the responsibility for generating a return on their own investment. In exchange the franchisor helps the franchisee develop their business and integrate with the franchisor’s brand.
This relationship, however, is more complicated than it seems at first glance. In one respect, franchisees are partners and investors. Because of that franchisors seek out potential franchisees to facilitate growth. However, franchisees also work for the franchisor and need to integrate into the franchisor’s organisation. To be successful, franchisors need to make sure that franchisees aren’t just solvent, but also that they’re a good fit for the company. In effect, franchisors need to conduct a job interview while simultaneously courting an investor.
Business goals and expectations
Franchisees often don’t have experience as business owners or entrepreneurs. Because of this, it’s important to discuss, and exhaustively explore what every potential franchisee’s goals and expectations are in regard to their franchise investment. Franchisees who have unrealistic expectations or who are simply not well informed are far more likely to have a bad experience and react negatively to challenges when they arise. They need to develop an accurate picture of what they can expect from their new business, and what they need to put in to make it work. This will allow them to make an informed decision about the value of their investment.
Cost expectations
Besides the initial cost of opening their franchise, franchisees may not be aware that they, like most new businesses, won’t turn a profit for months or sometimes even years after they open their doors. During that time, franchisees will need to make significant additional investments to keep the lights on and their employees paid. Additionally, they need to understand what business ownership demands in terms of their time and energy.
Profit goals
Find out what the prospective franchisee’s hopes are in terms of profits, and provide information about how some of your other franchises have fared. Give them an idea of how long it will take them to recover their investment, and what potential their business has in the long term.
Outlook and culture
Checking to make sure that your franchisees understand what they’re getting themselves into before they buy isn’t enough. A franchisee with a bad attitude can damage your brand and negatively impact the success of other franchises. Unlike an employee, you can’t easily fire a franchisee. Because of that, it’s important to take the time to find franchisees who identify with your business’ values and who are aligned with your larger goals.
Determining whether someone is a great fit in this regard isn’t always easy. Simply asking “what are your values” isn’t likely to elicit a very useful response. Instead, inquire about their past experiences and their relationships to their peers, customers, and subordinates. Additionally, it might be a good idea to ask prospective franchisees to provide references, the same way you would in any other interview process.
Training
Running a business is a complex job, and it’s a bit different for every industry and every individual business. Unless you’re working with a uniquely talented and skilled franchisee, you’ll need to provide a lot of guidance and training to help facilitate their success.
Create reference materials
Create an exhaustive operations manual that explains every process in detail, so that franchisees have a written resource to turn to for reference. This should be written as if the reader has no significant prior knowledge or experience, and should include everything from finding a location, to tackling bureaucratic issues, to operational instructions, to employee dress codes.
Teach a class
Provide initial instruction at your headquarters to give new partners the foundational knowledge they need to run their franchise. This should cover a wide range of topics, including your company’s background, philosophy, operating procedures, and the specific responsibilities that franchisees have to headquarters. This classroom-style course should be followed up with hands-on onsite training to give new franchisees a clear picture of what a successful franchise looks like.
Build a support network
Even a good initial training program often won’t be enough. Training can’t prepare you for everything, and new partners need access to more experienced franchisees to help them deal with novel or complex situations. A good franchisor can facilitate these relationships by networking new investors with more experienced and successful ones, and establishing an education relationship between them.
Onboarding a new franchisee is a delicate task that requires discernment, planning, and time. By taking the time to choose franchisees who share your values and have realistic expectations, and working hard to integrate them into your franchising network, you can use franchising to deliver strong and lasting growth for your business.
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