What do Franchisors Look for in Franchisees?

10 steps to Buying a business

By Andrew Cutler, sales and franchise director at Card Connection : In an economic downturn there is more competition for jobs.

However, this affects the franchise industry too and you may find you are up against some serious competition for that dream franchise.

So what exactly are franchisors are looking for in potential franchisees?

A franchisor is typically looking for three key attributes in a short list of potential franchisees: firstly, an excellent understanding and about how franchising works; an appreciation of the financial commitment required to buy a franchise; and – and most importantly - the right attitude and raw skills to become successful as a franchisee.

1) Understanding

In an interview situation, understanding and knowledge demonstrate interest.

However, in the franchise industry a thorough knowledge of what franchising involves gained through detailed research is necessary as the successful candidate will not just become another ‘employee’.

He or she will run their own business but at the same time represent an important part of a larger franchised brand.

Therefore, how seriously the candidate is taken, is often reflected in the quality of research they have carried out.

Magazines and exhibitions are great sources of information and there are many very informative websites like the British Franchise Association website to ensure you know as much as possible about the subject of franchising.

In addition, a clear understanding about the franchise organisation itself will be expected.

Therefore, research the types of customers you will be dealing with, the competition and learn as much as you can about the product or service you will be selling in advance of the interview.

2) Financial Commitment

For many, life savings may need to be invested in the purchase of the business and this requires serious and detailed consideration.

Franchisors will expect a potential franchisee to have a grasp of how to calculate whether the business they are interested in buying will be sufficiently profitable.

They will be expected to be asked for the profit and loss accounts of the outgoing franchisee or a similar sized territory.

They will also anticipate a potential franchisee to have an idea how much profit the business will need to generate in order to make a sufficient salary to live on.

Therefore, they will also expect questions about the cost of stock, training, equipment and ongoing costs. This will allow calculations to be made to see if the likely profit does match the required personal income level.

As well as an interest in the financial side of the franchise, a franchisor will also need to be confident that the potential franchisee has assessed how the venture would be financed.

Whether that is from savings or finance – the main high-street banks have franchising departments and can lend up to 70% of the franchise purchase price – or a combination of the two.

Similarly, franchisors are looking for potential franchisees who have a realistic understanding that some working capital is required to run a franchise on a day-to-day basis - particularly while it is growing.

Depending on the business model of the particular franchise, working capital can amount to up to 20% of the purchase price of the franchise.

3) Attitude

A successful franchisee is a certain kind of person.

Because previous direct experience is often not needed, new franchisees must respond well to training.

They must also have the ability to take advice and follow the franchising manual’s instructions.

Yet they also need to be people who take display enthusiasm and who are capable of taking the initiative.

Some franchises will require management experience and as this can only be learned over time and is not something that can be taught quickly, franchisors will be evaluating these aspects of a potential franchisee’s personality during the interview.

On a general level franchisees must be capable of running a business.

Typical traits the franchisor will be looking out for include the level of tenacity and determination that will be needed on a daily basis when running a franchise.

Willpower, drive, endless energy and a positive outlook are key and are invaluable in customer facing situations which franchisees will find themselves in on a daily basis.

These characteristics are often combined with a hunger for success, all of which make up the elements of the proactive, positive type of individual franchisors are typically looking for.

It is worth preparing examples of previous success stories in advance of the meeting.

Owning a franchise is hard work however, it brings with it the equal rewards of running your own enterprise.

It requires a particular type of personality, an understanding of the intricacies of the industry in addition to a significant financial commitment.

If you can demonstrate these essential qualities you will be well on your way to a successful interview with your chosen franchisor and the dream of owning and running your own franchise.