Practical guidelines for recruiting the best franchisees for your network.
Franchisors across the globe would all agree that recruiting franchisees is the most challenging part of their business. From cost effective lead generation and attracting quality candidates, to an effective screening, selection and onboarding process, choosing the right business partners is the single most important factor in determining your future success.
So where do you start in finding the right people and then qualifying them to join your network? How do you accommodate fluctuating market conditions, changing trends, the availability of franchise buyers and even the new technologies emerging to get your franchise message into the market?
Go back to basics to recruit franchisees
The key to this is being very clear, firstly about you.
Who are you, what do you offer? Candidates look to purchase a franchise that offers a lower risk than starting their own business. They are weighing up all the franchise propositions in your price bracket so you need to present a convincing and competitive business case. Let them know you have:
- a proven and profitable business
- effective operating systems and processes
- a growing and recognisable brand
- good on-boarding, training and ongoing support
- suitable marketing activity to grow market share
Secondly, be clear about who you are looking for.
You’re not selling franchises, you’re looking to attract good quality candidates to determine whether they meet the criteria to be granted a franchise.
Ask yourself – “What kind of people do I need to run my business?” and “What attitudes and characteristics have made me successful?” Understand who your ideal franchisee is, identify your expectations and don’t be afraid to communicate that message in both your lead generation and your screening process.
The clearer you are about the attributes, qualifications, skills, experience and values you are seeking, the more likely it is you will find the right candidates.
Recruit using a staged and structured process
Let’s walk through the screening and selection process because it is exactly that – a systematic series of steps from generating leads to assessing each candidate’s financial, legal, operational and cultural suitability.
A documented process also ensures all documentation is executed correctly and that you meet the requirements of the ACCC mandated Franchising Code of Conduct (the Code), keeping in mind that successful recruitment is not an end. It is the beginning of the working partnership that will last on average about seven years.
1. Financial capability
This is the starting point!
Make sure potential franchisees have or can raise the capital to enter the business and that they have a thorough understanding of the cash-flow projections and how much working capital will be needed until the business reaches the break-even mark. This may include the franchise fee, legal and accounting fees to seek independent advice and set up their business, and potentially any cost overruns for fit-out and any training or up-front marketing costs.
While the disclosure document contains basic financial disclosures, try and provide actual historical data from your existing corporate and franchise units as this will assist candidates assess the business and obtain finance. However you shouldn’t provide any projections to candidates, or financial data directly to any lenders, and it is never advisable to make any representations about what revenue or profit franchisees can or will generate.
To do: Crosscheck franchise candidates’ financial capability from reliable sources such as bank statements, financial records and their credit rating. ability to obtain a loan.
2. Skills and experience
This will depend on the requirements of your franchise.
Ultimately, a potential franchisee will need to have the necessary experience and qualifications to run their business independently and hire, train and manage their staff. If you have a medical service like physiotherapy, candidates will need to be registered with the Australian Physiotherapy Association and legally able to work in that specific profession with a relevant number of years of industry experience.
The same recommendation can be relevant for a fast-food outlet. Franchisees would need experience in the quick service restaurant space or hospitality industry and qualifications in this area would be an advantage.
To do: Review the resume and complete reference checks by speaking with past employers or relevant educators. Ensure that qualifications listed are obtained from credible sources and the skills and experience required are present with practical examples and visible evidence.
3. Franchisee profiling
There are two specifics elements here.
We all know that franchises are most successful when run by a committed owner-operator who understands and works in the business. Less well articulated but equally true is that a franchisee’s success is directly related to their willingness and ability to comply – with the business system, the operations and procedures, and with the franchisor’s directions.
Many successful networks also conduct individual profiling during the recruitment phase to determine the candidate’s suitability.
To do: Ensure that the candidate completes every stage of your recruitment procedure with precision from the application form and provision of all documentation to meetings, assessment and training as this will show their level of commitment and their willingness and ability to comply with all systems and processes going forward.
4. Brand ambassadors
This is about the cultural fit. The clearer you are in defining and articulating your values and the vision for your network, the greater the chance you will attract your future brand ambassadors: franchisees who know the brand history and will endeavour to continue its legacy without compromise; franchisees who will manage their staff, their costs, drive sales and profitability and most importantly look after their customers with the same passion and commitment you do.
Communicate your values from your lead generation and application process, throughout the financial, legal and operational qualification to the final grant of the franchise. Because statistics show commitment to the mission drives greater profitability, more sustained growth, and more motivated, compliant and successful franchisees.
To do: Identify the cultural fit through thinking and learning styles profiling, interviews, face-to-face and group interactions, as well as practical training situations.
Before you consider sharing confidential business information with any potential franchisee, make sure that you get them to sign a non-disclosure agreement, also known as an NDA or confidentiality agreement. This will ensure that all information is kept confidential and only shared with business partners and advisors.
It’s imperative that you or your recruitment representative adhere strictly to the Code in relation to the screening process and the execution of mandatory documentation. This includes the disclosure document updated annually by 31 October, the Statement of Independent Advice and the suite of legal agreements such as the franchise agreement, any vehicle or premises leases or occupancy licences, as well as an IP licence deed etc.
You will also need to observe the 14 day disclosure period and the seven day cooling off period prior to execution.
Execution of agreements and payment
This would appear obvious yet more than 20 per cent of franchise associated agreements brought to our law firm are executed without legal advice, are incorrectly executed – often missing vital elements such as a signature by one or other party in the correct place, dates, signature by guarantors or landlords etc. Getting this right is essential to protect your rights in the event of a dispute.
Effective recruitment builds sustainable networks
Generating quality leads, qualifying candidates, screening them appropriately and completing each franchise grant with correctly executed documents is time consuming and costly. Consider entrusting your franchise recruitment to an outsourced specialist, especially in the early days of your growth.
Experienced franchise recruiters have tested processes to ensure every lead is followed up appropriately, assessing capability, undertaking background checks, even assisting with obtaining finance where required and guaranteeing the relevant franchising Code requirements are fulfilled.
This will give you the ability to focus on the business operations and ensure induction, training and support systems are in place to grow your network.
An external recruiter presents potential candidates after they have been pre-qualified and screened allowing you to share your vision and develop the parameters of the future working relationship.
One important piece of advice: the quality of the franchisees will never surpass the quality of the recruiter. So whoever is recruiting, they need to be a fully trained, experienced and be a well presented representative of everything your brand and business stands for.
Stick to your franchise recruitment plan
Recruiting franchisees is only the first step. The psychological dynamic established during this process creates the foundation for the future working relationship. For good or otherwise! Many networks that struggled in their early years (or even collapsed) see the key factor as their failure to exercise sufficient diligence in granting those first franchises. That might have been engaging friends, family or enthusiastic customers without a clear qualification process or simply inadequately screening leads or selling to anyone with the money to buy in.
Stick to the plan. As clich_d as it may sound, your recruitment should be based on quality rather than quantity. So get it right. Because your number one recruiters will be the happy profitable franchisees you have already signed up. Every potential franchisee will want to talk to them when assessing your network and your offer. So it simply makes sense to invest in the total process that ensures you have found and selected the highest quality franchisees available and executed the relevant agreement correctly to protect your investment.
Authors: James Young, head of recruitment, and Holly Barnes, lead generation and marketing, DC Strategy.