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by Jeff Elgin,
last updated 23/07/2009

in this article:

In every issue of Franchise New Zealand magazine we feature and 'Ask The Experts' column. In this extract, Jeff Elgin explains what a franchisor is looking for from a new franchisee.

Q. I just started looking into a franchise company and they mentioned I would have to 'qualify' for the franchise based on their requirements and a checklist they had developed. Is this typical in franchising, or are these people just full of themselves and being difficult to deal with?

A. It may sound counter-intuitive, but this attitude is one of the marks of a good, strong franchise company. There are plenty of franchise companies where the only requirements to become a franchisee are that you can 'fog a mirror' (ie, breathe!) and that your cheque for the initial franchise fee doesn't bounce. Take a minute and consider which one sounds like the more effective approach to you.

Successful franchise companies want any new franchisee to do well. They have developed a set of standards, based on their past experience, that they know new franchisees should meet to maximise their likelihood of success. They will not accept any new franchisee unless he or she meets these standards, because they know it's not fair to either party to do otherwise.

Though these standards vary from franchise to franchise, there are four main categories all these standards seem to fall into. These are:

Capital. Everyone understands that going into any new business without the necessary capital resources is a recipe for disaster. One of the things any good franchise company will do is require a new franchisee to have sufficient net worth and liquidity to avoid this becoming an issue. When a prospective franchisee looks financially tight (but otherwise attractive to the franchisor), they will often require that the new franchisee obtain any necessary financing prior to approving them as a new franchisee.

Attitude. Good franchisors assume you will act in the same manner if you become a new franchisee as you are acting while you are a prospective franchisee. They will be making judgements about you based on your behaviour while you are investigating the franchise. They will be asking lots of questions like, 'Are you serious? Are you focused? Are you diligent? Are you a great person to deal with or are you a pain in the rear? Can you set goals and meet them? Can you make a decision when you need to?' These are attributes that successful franchisees tend to have, and they will be watching you to see if you have them as well.

General Skills and Experience. These are the characteristics that virtually all franchise opportunities need from their franchisees. How strong are your leadership skills? How much business experience do you have? What types? Have you effectively managed employees (or other comparable groups, like children) in the past? How good are your communication skills? Since a franchisee will end up being the 'boss' of his or her new business, these general characteristics are vital to a good franchisor.

Specific Skills and Experience. This is the category that is typically least important to a good franchisor. You may think it's an advantage if you already know a method to deliver the product or service in an industry you're considering, but usually the opposite is true. Many franchisors feel that getting a new franchisee to unlearn specific skills that don't match their operating system is much more difficult than starting from scratch and teaching the necessary skills to someone with no experience in their industry. In general, franchisors would rather have a blank slate to write on, though there are certainly a few exceptions to this general rule.

As you consider any franchise opportunity, a wonderful and telling question to ask the franchisor is, 'What is the profile of a successful franchisee in your business, and what are your requirements for qualification as a new franchisee?' If the franchisor doesn't seem to have this answer readily available, watch out. In all likelihood, they are just throwing darts to see if they get lucky and hit a balloon. Don't play this game unless you are prepared to lose - look for the franchisor who can tell you exactly what a person needs to be successful in their system.



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