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How do franchisors vet prospective franchisees?

Author: Shelley Nadler

answered by Shelley Nadler

Legal director at Bird & Bird

Franchisors consider a wide range of factors when vetting prospective franchisees.  It is important for the franchisor to determine if the franchisee has adequate financial resources. Although franchisees may borrow some funds, franchisors should evaluate whether the franchisee is offering any personal financial commitment. It is much more likely for a franchisee to stay with the franchise operation in difficult times if he has made a significant investment.  Experience is another relevant factor for the franchisor to consider. Some franchisors may wish for a franchisee to have little or no prior experience of their sector so that they can train them without any conflict. On the other hand, franchisors may look for specific background knowledge or skill that is an essential prerequisite for the industry they are in.  However, the key factor for most franchisors is their relationship with their franchisees. It is essential for the franchisor to be able to work with and trust the franchisee with his brand name and goodwill. Therefore, franchisors will carefully consider the personal qualities of franchisees during the selection process. A franchisor will try to establish whether a franchisee has the ability to cope with being self-employed and the stress this will entail. They will look for commitment from the franchisee and an understanding of all that is involved in running the franchise. The franchisee’s family support system will also be factored in

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