How do franchisors select the right franchisees?

Becoming a franchisee is more than just a financial investment. It’s a commitment to running a business within an established system.

Franchisors are extremely selective about who they take on, and understanding what they look for can help you prepare for a successful application. Here’s a comprehensive guide based on insights from experienced franchise experts…

Why are franchisors so selective about franchisees?

John Pratt, senior partner at specialist law firm Hamilton Pratt, emphasises that franchisors are very careful about who they accept.

“If you are approaching a franchisor and you sense it is adopting an approach that could be likened to ‘does the prospective franchisee have a pulse and a cheque book?’, you need to walk away,” he says.

Pratt explains that the selection ratio is stringent. “As a rule of thumb, for every 100 applicants a franchisor receives, only ten meet its criteria. Of those ten, only one or two will be offered a franchise.”

Financial stability is the first hurdle. “There really is no point in franchisors talking to anyone that has insufficient finance (or the ability to raise finance) to take the franchise in the first place.”

Equally important is the franchisee’s attitude. Pratt notes, “The franchisor needs to assess the franchisee to establish whether they are the sort of person that would ‘bust a gut’ to develop their business.”

Franchisees must be prepared to go beyond a standard job, sometimes working weekends or forgoing holidays. They also need to follow the franchisor’s instructions closely.

How do franchisors vet prospective franchisees?

Shelley Nadler, legal director at Bird & Bird, explains that franchisors consider a wide range of factors during vetting.

Financial resources are key, but franchisors also evaluate whether the franchisee is making a 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,” Nadler says.

Experience is another factor. Depending on the franchise, a franchisor may prefer someone with little prior experience so training can be provided. Alternatively, they may require specific industry knowledge.

Nadler highlights the importance of personal qualities: “It’s essential for the franchisor to be able to work with and trust the franchisee with their brand name and goodwill.” Commitment, self-employment resilience and family support are also considered.

How can I stand out as a prospective franchisee?

According to Nadler, preparation and motivation are crucial. She advises applicants to understand the franchisor thoroughly.

“You should learn everything you can about the franchisor company before you meet the team. This includes the history of the business and how many franchisees it has. How long has it been running a franchise operation? What market does the franchise operate in?”

Prospective franchisees should demonstrate alignment with the franchisor’s ideal profile and showcase personal ambition and business understanding.

Nadler adds, “A prospective franchisee should appear motivated and engaged at meetings with a franchisor. They must be capable of managing a business independently. However, they should also be willing to work within the constraints of the franchise system.”

What does a franchisor look for in a franchisee?

Louise Harris, principal at Franchise Projects, outlines the range of attributes franchisors typically seek. “Franchisors will usually have an outline avatar that may include age, skill set, past experience, location, educational standards and similar attributes,” she says.

Beyond experience, Harris stresses the importance of effort and adaptability. “Franchisees must be willing to put in full effort, whatever it entails for that franchise. The franchisee must be able to learn and follow a model.

“Prospective franchisees need to be able to afford the initial investment and sustain their lifestyle while the business grows to a point of making profit.”

She also emphasises personal qualities: “The people who succeed in our business are motivated to work alone. However, they also thrive on the collaborative approach of being able to draw solutions and innovation from a pool of peers.

“They have physical energy and personal charisma. This is critical in developing business contacts and a good customer base. Above all, honesty is what we value.”

What does the franchisee recruitment process involve?

Brian Duckett, former chairman of The Franchising Centre, explains that franchisors adopt a structured recruitment process.

“Good practice dictates that the franchisor develops a franchisee profile before they launch the franchise. This will list the attributes needed by a suitable franchisee for that system,” he says.

Requirements are tested in multiple ways, including:

● application forms

● references

● credit checks

● interviews

● psychometric tests

● visits to your home

Duckett notes that modern processes often begin with applicants researching the franchise thoroughly. This means by the time they engage with the franchisor, they are serious prospects.

From here, they may meet existing franchisees, prepare a business plan or funding plan and receive legal advice on the franchise agreement.

He reassures applicants: “Don’t worry if the process seems to be too detailed or intrusive. That will demonstrate that the franchisor is at great pains to be sure you will fit into their system.”

How long does the selection process take?

Louise Harris emphasises that the process should not be rushed. “Since both parties are signing a legally binding contract for a specific period of time, it’s critical they both know what they’re getting themselves into,” she says.

The process usually involves multiple meetings and can take a few months to ensure both franchisor and franchisee are confident in the match.

Harris warns against pressure tactics: “Anyone pressurising or hurrying a decision may not have your best interests at heart.”

Final thoughts

Becoming a franchisee requires a combination of financial readiness, personal qualities, business acumen and alignment with the franchisor’s system.

Preparation, honesty and commitment are essential – and those who can demonstrate these traits are most likely to succeed in the competitive world of franchising.