Qualities franchisors look for in a franchisee

As a franchisor, your success lies in how franchisees manage their franchised businesses. Like all businesses, running a franchise successfully takes a particular type of person with specific skills and qualities. Qualities of a good franchisee often vary across the specifics of your franchise. However, there are some key characteristics that every suitable franchisee should possess. This article will take you through seven qualities franchisors look for in a potential franchisee. 

Ability to Follow Franchising Rules

If you are a Franchise Association of New Zealand (FANZ) member, then your franchisees need to be willing to follow the association's  Code of Practice and Code of Ethics. As a franchisor and member of FANZ, you must give your franchisee the Code of Practice and Code of Ethics seven days before signing the franchise agreement. If the franchise agreement is signed, the franchisee must follow both Codes to a high standard to ensure your brand reputation is not compromised. 

The Code of Practice aims to promote high standards of franchising conduct and ensures a fair relationship between you and the franchisee. It outlines how both parties should act and the best franchise business practices. 

Notably, if you are not a member of FANZ, then neither you nor your franchisee needs to comply with the Code of Practice or Ethics.

Willingness to Follow the System

One of the many advantages of owning a franchise is that one business model can work for all franchises. You do not have to establish a different process for each franchise, saving you time and money. Your systems have often been developing over time and have proven successful. Therefore, you should look for a franchisee willing to follow the existing system. Otherwise, all your efforts may go to waste. 

Hiring a franchisee who does not follow the pre-defined system can negatively impact your business. If the franchisee refuses to follow the processes, your overall franchise brand can be jeopardised. Importantly, customers of your franchise brand expect to have the same experience at every location. This will not be the case if franchisees are not following the system.

Further, managing a franchisee who disregards your established procedures will be more difficult. While you might allow feedback from your franchisees over what is not working or how you can optimise processes, a franchisee who ignores your set system can be very challenging to communicate with.

Desire to Learn

A desire to learn is a crucial trait franchisors look for in a  potential franchisee. It signals that the franchisee is open to improving their skills and learning new information to help their business thrive.

Similarly, continuous learning is essential for a franchise. As such, a good franchisee will be able to learn and grow from others to understand the ins and outs of the business and ways to improve operations. The learning experience should come from:

• the franchisor;
• other franchisees; and
• customers.

A desire to learn is particularly valuable due to the nature of a franchise. When buying a franchise, you buy the franchise's business model, systems, operations and brand. Accordingly, a franchisee must be receptive to learning from the franchisor.

If a franchisee feels they cannot learn from the franchisor and is adamant about doing things their way, running a franchise might not be for them. 

Adaptability

Adaptability is a highly desired trait in all franchisees. It is the ability to cope with and manage changing circumstances. Being able to bounce back from hardships is another critical element.

While uniformity and consistency are the foundations of a successful franchise network, a franchisor might wish to change operations as they discover better  systems or methods. A franchisee must be able to adapt to these changes when needed. Franchisees will also need to adapt to challenges outside your control. For example, an increase or decrease in demand for the franchise's goods or services can occur at short notice. Coping with changes with little notice is the key to a sustainable franchise. 

To help the franchisee, you may offer training and support to ensure they follow in your footsteps of success. However, if the potential franchisee seems unwilling to learn from you, they may not be a great fit. A suitable franchisee will understand how crucial personal development is to the franchise's success and will be adaptable to your rules and needs. 

Financial Skills and Capacity

One of the many key qualities to consider is a franchisee's financial knowledge. A franchisee will be operating their own business and must understand its finances. It is not expected that a franchisee will have accounting skills. However, they should be able to demonstrate the ability to learn how to manage the business' financial operations.

A franchisee must also have sufficient capital to invest in a franchise. Buying a franchise is a huge investment, and without proper finances, the franchisee may drive the franchise into a loss. Moreover, you may  require a franchise fee to be paid. If the potential franchisee cannot pay this or is unwilling to, this may raise a red flag. 

As a franchisor, you should also ensure the prospective franchisee has sufficient working capital for daily operations. You must undertake relevant due diligence into prospective franchisees before entering into an agreement with them to ensure they can pay all required fees to you and operate the franchised business. Further, you may want to confirm that the franchisee does not have plans to run the franchise solely on debt finance, as this could increase your franchise's liabilities to an extraordinary amount. 

Good Communication Skills

A good franchisee must be a good communicator. Communication skills are essential qualities for the longevity of a franchise. A franchisee must communicate with the franchisor, staff, and customers. 

A good communicator will be open and honest with their franchisor and approachable to their customers and staff. They should also be willing to take on constructive criticism from the franchisor and be able to pass on any feedback to the franchisor. 

Results Oriented

Finally, franchisors often look for a results-oriented person, as operating a franchise takes a lot of hard work and dedication. In addition to meeting the franchisor's benchmarks for success, a franchisee should set and achieve their own measurable goals. They should not just want to be successful because the franchisor requires them to be. Instead, they should want to make sales and increase customer satisfaction on their own terms. As such, internally motivated people make the best franchisees. 

Key Takeaways

When trying to find the perfect franchisee for your franchise, there are essential qualities that you should look for. First, the franchisee should be willing to follow the Franchising Code of Conduct on top of your existing systems. They should have a strong desire to learn and be adaptable to changing circumstances. You also want to conduct due diligence to ensure a prospective franchisee has the financial skills and capacity to run a business successfully. Finally, assess whether they are good communicators and are results-oriented. Finding a franchisee with several of these qualities will give you peace of mind that your franchised brand is in good hands.

Frequently Asked Questions

What makes a franchisee's willingness to follow the system crucial?

A franchisee's willingness to adhere to your proven business model is essential for maintaining brand consistency and operational efficiency across all franchise locations. Deviating from your system can disrupt the uniform customer experience and complicate management.

Why is a desire to learn important for a franchisee?

A strong desire to learn indicates that a franchisee is open to improving their skills and adapting to your business model. Continuous learning helps the franchisee understand the business better and contributes to the franchise's overall success.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.