The Vetting Process: 4 Questions To Ask Every Potential Franchisee
Opening a franchise takes a heck of a lot of work. Considering that nearly 20 percent of franchise loans end in failure (and that number is expected to grow), you’ll want to make sure you’re strategically selecting partners. All too often, franchisors fail to vet franchisees, who then turn out to be ill-prepared for the hard work and dedication necessary for successfully running the business.
When we started our trampoline park franchise program, we sold a territory to someone who was not 100 percent committed. That was a mistake. The franchisee never looked for a location, and we never opened. It took too long to find a new buyer, and the competition eventually moved in, capturing our market share. It was a hard but important lesson to learn: A poorly vetted franchisee can wreak havoc on your business plans.
Long-term success beats short-term gains
In the franchise world, money is made when the location is open and successful. If you sell territories without ensuring that the person you’ve selected to manage each one is a good fit, you may experience a short-term gain, but you’ll be hurting in the long run.
A location failing in Miami, for example, likely won’t affect locations in New York and San Francisco. But when you sell too many franchises to unfit partners, this can create a domino effect of multiple locations closing. Even the most veteran franchisor will feel the pain when that happens. Psychologically, it can feel like the brand is dying – not to mention the bad press that closures generate.
Instead, focus on selling to the right people who will help you operate successfully for years. You want franchisees who will fight alongside you in the good times and the bad.
4 questions to ask potential franchisees
Investing heavily in a franchisee and the location only to have it quickly fail represents a lot of wasted time, energy, resources, and money. Make your job as franchisor easier by doing the necessary legwork up front. Seek out franchisees who are wholly committed and who understand the work required to make the business a success. Start the vetting process by asking the following four questions.
- How committed are you to getting the location open?
Obviously, the correct answer is “very committed.” Proceed into a partnership only with individuals who demonstrate an understanding of the heavy investment required. There’s a lot to be gained by running a franchise, but it requires hard work. If it sounds like the investor is hoping this will be an easy, effortless venture, run – don’t walk – away. There is no such thing as getting rich quickly.
- Why are you interested in the franchise?
The best franchisee partners will be passionate about your brand, want to give back to the community, and plan to grow with the company over many years. If it seems an investor is interested only in the potential payout, they probably are not going to make a valuable long-term partner.
- What is your long-term plan?
If the potential franchisee says they want to build the location and then sell for a profit, that should be a major red flag. The one thing a franchisee cannot transfer to a new owner is experience. Often, the most successful franchise locations have an owner at the helm who has been steadily building a wealth of expertise over years of work.
- Who will handle your operations, marketing, and finance?
You want individuals with long careers to fill these roles. It’s a bad sign if the potential franchisee instead plans to hire inexperienced family members or friends.
With every new franchise location, you’re putting your brand in the hands of the franchisee you’ve selected to take the helm. You’ve lovingly and painstakingly built your business from the ground up, so why entrust it to anyone but the best? By properly vetting your franchisee partners, you’ll ensure the upward trajectory of your profits, your reputation, and your long-term success.
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