Dan Bish is a 35 year veteran of the franchise industry, as both a company executive and as a franchisee multiple times. His specialty is in structuring franchises for growth, franchise marketing and franchise development. He is a partner in FranLaunch USA, a Tucson, Arizona based management & investment firm specializing in helping early stage and international franchisors gain a foothold in the American marketplace.

A common mistake, especially for emerging franchisors, is to choose the wrong franchisee. Here are four steps you can take to prevent that happening.

 

“Franchise development isn’t just about adding new units. You’re laying the groundwork for everything you’d like to achieve for years to come”

 

I’ve got a birthday coming up soon and, truth be told, I’ve racked up quite a few of them now. Birthdays are always a time for reflection for me – a little analysis of where I’ve been and where I’m going and all that. Lately I’ve been reflecting a lot on just how much this crazy franchising business we’re in has changed over the years and how, in some ways, things just seem to stay the same.

Take franchise recruitment for example. While we’ve seen huge strides in technology that makes it incredibly easy to engage and inform our franchise candidates, there seems to be a disconnect between who we think makes a great franchisee and who gets selected. I hear time and time again from franchisors who are mired in conflict with their franchisees. Or they’ve allowed an attitude of us-versus-them to infect their corporate culture. What’s at play here is that franchisors, especially emerging ones, are often signing the wrong players early on. I single out emerging franchisors here because usually more experienced franchisors have already been forced to find and recruit better team players. They simply don’t have a choice if they want to prosper. Still, it’s a story I hear all too often – expansion is going along great, you’re finally covering overheads and starting to really gain some traction when, wham!, a major conflict with a franchisee hits your desk and it’s all you can think about. All focus is lost, growth slowed, and why? Well, let’s sort out the four most common mistakes I see with franchisee selection, and how fixing them can build your brand and increase growth and stability.

1- Stop Selling. Top of the list first and foremost – franchise development isn’t just about adding new units. You’re laying the groundwork for everything you’d like to achieve for years to come. As you continue to grow your concept, you’ve already got significant challenges to overcome. Everything from adopting new technologies to marketing to vendor relations and more. Do you really want to tackle all this with franchisees who don’t see your vision and won’t or can’t execute alongside your corporate team? You’ve got to put rationalization and economic concerns aside – if a candidate doesn’t qualify, don’t take their money. In other words – “The fish that jumps in the boat is the one that starts smelling first!” So, stop “selling” franchises and start “qualifying” your candidates.

2- Don’t ignore the human element. As much as I love technology and everything it’s done to streamline all aspects of the recruitment process, I recommend you don’t lose sight that this is much more about winning hearts and minds than about lead scoring or marketing analytics. Especially if you’re a new franchisor – you’ve got to become expert at expressing the vision and mission behind your franchise and then work to find candidates that strongly align with it. A candidate can tick all of the other boxes – financial, experience, etc. – but they also need to be inspired by your brand’s unique compelling story. Yes, this is harder than just letting them jump in the boat. But the dividends paid will extend well into your brand’s future.

3- The shotgun approach is a killer. Simply put, where you award franchises can be as important as who you select. One of the biggest mistakes I see, especially with emerging brands, or with international brands expanding into America, is the willingness to take any franchise deal regardless of how far away it is from headquarters, otherwise known as the shotgun approach. We recommend our clients develop a small group of franchised units around one central population center first, and then work their way out as they grow. Not only does it keep support costs down early on, but it’s really more about turning that group of franchisees into brand fanatics that will help convince others to join and to be equally as positive about your brand. That initial tightknit group will more likely quash any franchisee negativity and, if they’re nurtured correctly, will be there for you when the inevitable issues arise, or concessions are needed.

4 – Flying by the seat-of-the-pants. So far, we’ve mostly dealt with what you might call the ‘art’ of recruiting. Now it’s time for the ‘science’ part. This is where you can and should create absolute, unbreakable rules for your approval committee that assures every candidate is run through the same qualifying steps on the way to being approved. You need a system that is super strict and insures you don’t ignore warning signs or let anything slip through the cracks. As much as a candidate might try to sell themselves to you, you simply can’t afford approving a candidate just because they were able to charm their way through the process.

Some of the specific steps are:
• Invest in personality tests, credit checks and, if possible, ask about prior litigation.
• Create a clearly-defined scoring system so you’re dealing with data in an objective way.
• Have a multi-interview process and assure that interviews are a non-negotiable task for all of your department heads.

Also, if you’re the decision maker, don’t share your thoughts on a candidate with the rest of the team until they’ve had the chance to give their opinion. You don’t want to telegraph your opinion and make it uncomfortable for everyone else to express theirs. And most of all, be careful about overriding your team if they feel strongly about a candidate – positive or negative. Like I’ve said, franchisee selection is as much an art as a science and it’s one of those areas of business where a consensus opinion really does help ensure that you’ll get the best franchisees for your brand.

Long view discipline matters. A few years ago, I was helping a fledgling QSR concept launch a national brand. Prior to my joining the project, they had sold franchises to just about anyone who showed interest. While I was able to get franchise growth headed on the right path, the damage of a few of those early deals had already begun to cause some serious problems. In fact, one franchisee in particular had become so caustic and negative that we had to cease all recruitment efforts and go through the lengthy process of working him out of the system. It took a majority of our focus and not a small amount of money to resolve.

I get the fact that franchising can be a numbers game. Budgets, cash flow and capital allocation are facts of life. But over time, nothing can add more to your bottom line than having a supportive franchise community that enthusiastically supports you and your brand and provides killer validation to new candidates. The next time you’re tempted to sign a sub-par candidate just because you need to “sell” a franchise, remember Pareto’s Principle – also known as the 80/20 rule. Your goal should be to spend at least 80% of your time nurturing the great franchisees in your system and only 20% with those that just don’t get it. Not the other way around.

Go forth & recruit. Franchisee selection is an ongoing process. The four steps above could certainly be expanded on, but the important takeaway is this – if you want your franchise concept to see plenty of birthdays in the future, take the long view and start qualifying instead of selling. Do complete and thorough research and due diligence on each and every candidate. And then only approve those that you think will work with you to take your concept to new heights. Here’s wishing you many happy returns.