The Franchisee & Franchisor’s Point of View
Many of the characteristics of the perfect franchisee are shared by both a franchisee and a franchisor, but there are also some slight differences. A franchisor is more concerned with how an individual franchisee will fit into their business as a whole, and not necessarily how the single franchise will operate on a day to day basis (although that’s still important to them). Meanwhile the franchisee cares almost exclusively about the success of that individual.
As a franchisor the perfect franchisee is someone who has the drive and motivation for success, but doesn’t want to go out on their own and run their own independent business. Here are some of the biggest factors that franchisors consider when looking for the right franchisor.
● Do they have strong motivation and the drive to achieve success?
● Do they have confidence and enthusiasm for the product or service, rather than just a desire to make a profit?
● Do they have most of, but not all of, the administrative and entrepreneurial skills necessary to start, develop, and operate a viable business? In other words do they need the franchisor’s support?
● Are they not only good at learning new things, but also good at motivating and teaching others?
● Do they have at least five years of managerial or teaching experience?
● Do they have experience and working knowledge of the industry they’re interested in?
Now possessing all of these characteristics is rare, and missing some of them doesn’t mean you wouldn’t be a successful franchisee. Likewise having all of them doesn’t ensure you success. But as a rule of thumb these are a good guide for franchisors looking to determine which candidates would be more likely to be successful.
A few industries, most notably some fast-food systems, do not seek the last qualification we listed. Several fast-food systems actually automatically disqualify applicants with a restaurant background. The idea here is that a franchisee freshly trained in the franchisor’s procedures will be more successful than one coming from the same industry with different and often conflicting habits.
Similarly, many hair and beauty salon franchises will not recruit technical people (stylists and cosmetologists). Instead, they look to business people with no hair styling or beauty skills to become franchisees. They believe the management, customer service, and skills sales are the most important qualifications.
Most franchisees already operating in a system have opinions as to how prospective franchisees should be evaluated. After all, they have an investment to protect. A Taco John’s franchisee had the following to say: “I would look for a franchisee who would positively benefit the chain. The franchisor shouldn’t pocket the $20,000 fee and in two years watch the franchisee fail. They should look for people who are dedicated and have enough resources to be successful. Basically, they should be more discriminating about whom they enlist. The ultimate success of the franchise lies in the strength of franchisees.”
The opinion from the franchisee perspective is slightly different. As a franchisee you are focused on making sure your individual business is as successful as possible. That is why the majority of franchisees say that there is a single trait that is most important when determining if a franchisee will be successful - Are they a good salesperson. Just about every franchisee - from businesses as diverse as management training to residential cleaning - mentioned sales skills as a prime requisite.
As an adjunct to the emphasis on sales, franchise owners need a healthy self- image to handle all the rejections that come their way. It is important, however, not to take every rejection as a personal affront. The most successful franchisees look at the sales function as a numbers game, where, if they persist in their efforts, they will ultimately reach their goals.
In addition to strong sales orientation, a successful franchisee must have a high energy level. Almost all the franchisees we talked to talk about the long hours. The bigger frustration however, is in not receiving a salary commensurate with the amount of time and effort. A franchisee can expect a slim salary for a tremendous amount of work, at least for the first year or two of operations. So, in addition to a high energy level, a certain resiliency is also necessary.
Franchisors Exposed to Liability Based on the Conduct of their Franchisees
Facts that have been considered relevant to whether a franchisor might be exposed to vicarious liability regarding the conduct of its franchisees include:
Why Franchisors Don’t Like Negotiating
The first impression that the franchisee gets from reading the franchise agreement is total incomprehension, unless they are well versed in legal terminologies and phrasing. The FDD is required to be in plain English but the franchise agreement has no such requirement. Typically, the franchisor’s legal department works extremely hard to secure the franchisor’s position through the Agreement and makes it impenetrable for someone who is not a lawyer to understand. The uniform nature of the agreement for all franchisees makes it assumed that the franchisee must sign the agreement so that all the franchisees follow the same terms. Even though that is partially true, the franchisee can plead their case and negotiate terms where they believe that they are offering something unique to the franchisor.
When a Franchisor Files for Bankruptcy
This article provides a brief history of some well-known franchisor bankruptcies of recent years -- including Denny's, Bennigan's, Steak & Ale, Original Roadhouse Grill, Cork & Olive, The Ground Round, Church's Chicken, Popeyes, and 7-Eleven -- with a look at the outcomes of these bankruptcies for both the franchisors and their franchisees.