What does a franchisor look for in a franchisee?
answered by Shelley NadlerLegal director at Bird & Bird
Franchisors consider a wide range of factors when recruiting franchisees.
It’s 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 they have 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 knowledge or skills that are a prerequisite for the industry they are in.
However, the key factor for most franchisors is their relationship with their franchisees. It’s essential for a franchisor to be able to work with and trust a franchisee with its 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. The franchisee’s family support system will also be factored in when franchisors are vetting potential franchisees.
Franchisors should also evaluate how ambitious a franchisee appears to be, as the more committed they are, the more likely they are to be successful. The franchisee must be capable of managing a business independently, but they must also be willing to work within the constraints of the franchise system.
- How much will you need to put into becoming a successful franchisee?
- What exclusivity do I get with a franchise?
- What options do I have when it comes to financing my franchise?
- Is granting a franchise the same as granting a licence to trade under another company’s name?
- What is the ‘ongoing franchise fee’ charged for?
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