You wouldn’t marry someone without getting to know them pretty well first. When it comes to engaging franchisees, emerging brands need to select with similar care, says Adam Robinson
When franchisors gather at industry events, conversations inevitably lead to a sharing of war stories about ‘nightmare franchisees’ no longer in their systems. While any number of factors can lead to a failed franchisee, it often traces back to a breakdown in the franchisor’s selection process. The difficult franchisee who doesn’t follow systems, doesn’t have enough capital reserves to survive their startup phase, or creates drama for the home office shouldn’t have been signed on in the first place.
A study on the causes of franchisee failure by Griffith University Professor, Lorelle Frazer, validates this conclusion. Frazer interviewed franchisors and failed ex-franchisees for insights into what went wrong. The study found that franchisors often chose unsuitable franchisees due to “a lack of suitable selection procedures and criteria which enabled entry to candidates who were under-prepared, under-capitalized, unsuited temperamentally or who had unrealistic expectations of what running a business was really like.”
Careful selection of franchisees should remain a steadfast rule throughout a franchise system’s entire life cycle, but is especially critical for emerging brands. A system’s initial franchisees shape the first impression of a brand in the marketplace. Choose carefully with the right people, and the system is off to a good start. Conversely, selling fast to the wrong candidates will prove to be a painful, sometimes irreparable mistake.
How does an emerging franchisor avoid the proverbial “bad franchisee?” It boils down to starting with the right mindset and adhering to a careful selection process based on a firm ideal franchisee profile.
With fierce competition in franchise sales, franchisors tend to go hard on promoting themselves. While some self-promotion is necessary, they may want to shift their mindset and approach to one that is similar to that of the U.S. Marines. When the armed forces would come to recruit at our high school, the Army recruiter would get up in front of 1,000 students and share all the wonderful things that would happen to us if we joined the Army, such as travelling, going on missions, gaining skills, etc. Next, the Navy, Air Force and Coast Guard would get up and use the same approach – emphasizing the benefits we would gain from joining.
Then the Marine Corps recruiter, a gunnery Sgt., would get up and look around the room and say: “I don’t see a single person sitting in this gym who appears to be Marine Corps material. But if you think I’m wrong, I encourage you to stop by our booth.”
Take one guess whose booth had the longest lines? That sergeant wasn’t selling us on the benefits of being in the U.S. Marines, rather, he was letting the students come to their own conclusions that they had what it took. In the end, the students were attracted to the challenge and were willing to compete for that opportunity.
That draws an interesting parallel to what many companies do in their marketing and how the top franchise brands approach franchisee recruitment. They explain the reality of being a franchisee within their system and let candidates make their own decisions, based on their perceptions of value. The potential franchisee decides on their own – without a hard sell – if the value will exceed the amount of time and money that they will put into it.
A Recruiting Process
The technical definition of the word process is “a series of actions or steps taken in order to achieve a particular end.” For most emerging systems under 50 units, anyone with a check looks like a good prospect. It’s hard to say no when you’re trying to get your brand’s wheels up. But that temptation is a spiral that leads at scale to extremely challenging times – the franchisee war stories overheard at franchise industry events around the world.
When creating a franchisee recruitment process, start with recognizing the basic functions of top performing franchisees. The Griffith University study notes three key areas to look at:
Top performing franchisees maximize the profit potential of the business. Because if they can’t do that, they aren’t going to be successful, and you won’t either.
They deliver a great customer experience, every time. They care about customer experience and tend to run more profitable locations.
They are comfortable adopting the role of ‘franchisee.’ You are not asking them to be in business by themselves, rather asking them to follow a model and system. Not everyone fits that role.
Define Your Ideal Candidate
Establish a profile of an ideal franchisee, along with corresponding criteria to hold all candidates against. A franchisor can use profiling tools that grade and score candidates based on a variety of factors including financial acumen, business skills and overall knowledge.
The Griffith University study offers the following ‘perfect franchisee’ profile:
Having adequate reserves of working capital should the business be slower to grow than anticipated.
Having an interest in finance and business affairs.
Having the emotional support of friends and family.
Being able to work independently.
Being able to get things done efficiently.
Being well organized and proud of one’s personal presentation.
Having physical and emotional resilience.
Being comfortable selling to people.
Being able to organize and motivate others to get things done.
Having a belief that one will be successful through one’s own efforts.
Working effectively as part of a group.
Being attracted to continuous improvement.
Being trustworthy, giving accurate information.
Having a realistic understanding of the franchise relationship and the obligations to both parties.
Determining the Right Fit
Discovery days are an important element to ensure a candidate will be the right fit for a franchise system. Brands typically take candidates through a detailed interviewing process, where they sit through a round robin with members of the marketing, operations, technology and development teams. Later, they compare notes. They evaluate things like passion, energy and what they will bring to the table.
Some brands go to great extent to test a candidate’s true love for the business by having them work in the business for a week or more. In doing so, they see what it’s like from the inside – tasting for themselves the good and the bad. Some will walk away with their visions validated, while others just walk away. Better to learn early on that their dreams didn’t match the reality than down the line – after significant investments are made by both parties.
For some franchisors, ensuring good value fit takes top priority. The make a point to seek out franchisees who share and align with their values. For these franchisors, qualities such as passion, integrity and empathy take precedence over most all other criteria. Smart franchisors will spend a great deal of time with candidates to thoroughly evaluate and test their value systems.
To some franchisors, determining true passion for the business and product trumps all else. They find that if money is the candidate’s only motivation, they’re most likely not going to survive through some of the inevitable tough times ahead. But if they have a true passion for the business, chances are they will be there for the long haul.
In fact, many franchisors view their Discovery Day as an event not so much to sell, but to un-sell. These franchisors are 100 percent transparent with candidates about what to expect in running their franchise, including the ebbs and flows with sales, employee issues, potential and existing marketplace disruptions, and more. Those candidates with a true passion who are up for the challenges will be the system’s top performers, often growing as multi-unit operators for a brand.
Many of the same principles that apply to hiring employees translate to the franchisee recruitment process. Having a process, an ideal candidate profile and being careful and thorough wins the game. Emerging franchisors should resist the quick, tempting franchise sale. Short-term decisions by overly eager emerging brands will only lead to long-term pain. Being highly selective and following a logical process will lead to great things – and ultimately avoid a fate of participating in franchisee war story exchanges.
ABOUT THE AUTHOR
Adam Robinson is co-founder and CEO of Hireology, a venture-backed hiring and talent management platform named an Inc. Top 50 Best Workplace and No. 94 on the 2016 Inc. 500. He’s the author of The Best Team Wins: Build your Business Through Predictive Hiring, and the host of The Best Team Wins Podcast featuring leading entrepreneurs discussing the people side of their business. Adam is a highly sought-after speaker on the topics of entrepreneurial leadership and building exceptional workplace culture.