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The right franchisees will make you; the wrong franchisees will sink you. Maybe one of the most daunting aspects of becoming a franchisor is selecting the franchisees who will grow your brand. The right people do the right thing – pick the right locations, hire and motivate the right teams, hold the highest standards and are always investing in growth. The wrong people do the wrong thing — they pick the wrong location, hire the wrong people, motivate their teams the wrong way, cut corners, ignore standards, etc.
Multi-unit franchisees
The point of owning a franchise is to get wealthy, and you do that by owning multiple units. The most successful franchisees are large, multi-unit franchisees who make you wealthier because they do it right. They pay you more in fees, they refer other franchisees to you, they even have ideas that can improve everyone’s business.
It takes a unique mindset to succeed in franchising — just because someone was successful in a prior life doesn’t mean they will be successful franchisees. Franchising is “sort-of” entrepreneurship — the owners are investing in and taking on the risks of starting a new business, but that business is following someone else’s playbook. They have to believe in and want to keep investing in that playbook.
Related: From Coding to Creole Cooking — Here Are 5 Inspiring Success Stories of Black-Owned Businesses
The Playbook
That playbook is what is making the franchisor wealthy — you only succeed if the franchisees succeed. Franchisees pre-pay you to come into your system, then continue to pay you to stay and prove your brands in more and different markets. As they grow, economies of scale give you more buying power for more profit. The result is a skyrocketing company value that you can sell someday for life-changing money.
In addition to the obvious — honesty, stability, strong finances, etc. — here’s what to look for when you’re interviewing your ideal franchisee:
- Curiosity. Is your interviewee asking you questions about your brand? If they are, that shows a passion for your business that will translate into success.
- Ambition. Your highest-performing franchisees will want to grow their business to develop generational wealth themselves. They want to succeed and use that success to open more units, which pays you more royalties and makes your business more attractive.
- Independence (sort of). The ideal franchisee follows the playbook — it’s there for a reason and consistency is vital to the brand. But you don’t want to spend all your time micromanaging then, either. Find people who will pick up the ball, run with it, and call you once or twice a year (one of which could be your birthday).
- Collaborative and cooperative. You want a team player who can share their ideas and experiences with you, their staff, and their peers at your other units. You know why Five Guys sells milkshakes? A franchisee suggested it. The Big Mac was invented by a franchisee. Thousands of people got rich.
- Positivity. You’re going to have bad days, weeks, even months. People who remain positive about their business and the brand are critical for their success and your sanity.
- Accepts and offers feedback. As the franchisor, it’s your job to ensure that all of your franchisees are superlative representatives of your brand. You’ve supplied the services and materials for them to succeed, but you should be available for advice and to check on how the business is going, especially in the early days.
- Helpful under pressure. You need people who will support each other and come up with ideas during an inevitable rough patch. When Covid hit, Firehouse Subs suspended royalties to help their franchisees. Franchisees worked with their landlords to defer rent. You have to be the person other people want to work with.
Related: Want to Become a Franchisee? Run Through This Checklist First.
What you don’t want
Just as important as finding those exceptional candidates who are committed to following the playbook, being a team player, and adhering to brand standards is avoiding other types of potential franchisees:
- A single-unit operator. The purpose of franchising is not to buy a job. Someone who is just interested in buying a job should stay in the corporate world. The point of a franchise is to open another and another until you accumulate generational wealth.
- A tightwad. The adage “Save a penny, lose a dollar,” really applies here. A cheaper location may save on rent but will require a lot more marketing costs. Skimp on paying your employees, and the high turnover and lost productivity will cost you more in the long run. It could even destroy your brand. An extreme, but true example: I once interviewed a potential franchisee for Halal Guys who asked if he really had to serve halal chicken instead of the more affordable generic poultry. (Seriously? It’s in the name.) Guess who didn’t get the franchise?
- Someone who doesn’t listen. You’ve developed the system that creates a successful business. People who won’t accept your feedback not only sap your time and resources, but also your energy and brand value. The only answer is to terminate when you can.
- A backstabber. As I mentioned above, you’re going to go through a rough patch. But positive people pull together to help each other. In another true story, a franchisor client got wind of a private chat channel among some franchisees who were badmouthing corporate, individuals and more. At the next franchise meeting, he called them out publicly — and then bought them out. We all have to pull in the same direction, otherwise we go nowhere.
It takes time and research to find the right people, but it’s the key to building a business that will not only succeed for you, but for the franchisees, and the people they serve.
