This week I participated in our regional Franchise Forum of which I am one of the founding members, and the topic of discussion was choosing “The Right Franchisee”. As you can imagine, this topic was a hot one. Participants included 600+ unit systems like Smoothie King, as well as younger franchises like KidCam and The File Depot, along with franchise support companies like Design the Planet and Folse Financial.
Much of our discussion were focused on finding the right prospective franchisees in the first place. Everyone agreed that the franchising landscape has changed, and newer resources like online technology is playing a major roll in this evolution. Nowadays, when people start considering franchising a business, they do a ton of research on the web to help them with their decision making. Several franchisees acknowledged how they are behind this technology curve, but are working aggressively to catch up by integrating technology into their selling-system in order to connect with people who are researching online. To help demystify some of what is going on, I shared statistics from Forbes Magazine http://www.forbes.com/sites/gyro/2013/01/07/the-disappearing-sales-process/ (and others): because of online researching, nearly 60% of the sales process is over before the sales rep is engaged. That doesn’t make your sales team order takers, but it if you build your E-Systems correctly, you might just make their jobs a little easier (or, harder depending on what people find as they do their research).
The bulk of our Franchise Forum discussion was allocated to debating “the length of the sales process.” and what steps to take to find the “right franchisee”. I always tell people that taking on a franchisee is like getting married. You should take the time to get to know them and their personality, make sure they are the right match for you by having all of the qualifications to work successfully in your business model, and will be a suitable partner for the next 20 – 30 years. If they don’t seem like a good match, then don’t accept them as franchisees. If you have ever been in a bad marriage, you may know what it is to make a commitment to the wrong person. The more experienced franchisors in the room expressed the need to “take your time” and make sure there is a fit. Another franchisee expressed the relationship between a franchisor and franchisee as a parent and child relationship (this is a slightly modified version os what was said). The child goes through the phases – young, loving and dependent on the parent for the first 5 years in franchise; then upon reaching adolescence, the franchisee gets a little rebellious and wants to do things their way; and by year 15,they are respectful and appreciative that the parent/franchisor didn’t kick them out of the system during their rebellious phase. A great analogy provided by Tom O’Keefe (President/COO at Smoothie King Franchises, Inc.).
I know that most small franchisors will try to take almost “anyone” who financially qualifies in the beginning of the franchise’s life cycle, but we should consider the experience of the more experienced franchises who went into great depth explaining why franchisors should be more choosey. They discussed the need to set the right expectations up front, and the plethora of problems that may start to appear if you either don’t set the right expectations or you set no expectations at all. I other words, mind your FDD carefully when including info that will be used by the prospective franchisee to make their decision.
There was a great closing statement from Dan Hannah (VP of International Business Development) slightly modified – if you find yourself hesitating on granting a franchise, then you should stop right there and say, “no, this one isn’t right for our company.” – I always believe in going with your gut.