Guest Blog: Proven Ways to Recruit Quality Franchisees

Guest blog image of Andy Erskine and Management 2000 logo

Management 2000 is pleased to accept the opportunity, given to us by Wheat Creative, to write a blog on 3 Proven Ways To Recruit Quality Franchisees.

We are interpreting “recruit” to mean the process and not lead generation. So we are focusing on three proven ways to improve your franchise development system. Improving your development system creates a sustainable business for you, the franchisor, and your franchisees.

7 Things That Do Not Produce Great Franchise Systems

1. To believe, and to make your candidates believe, they are buying a franchise.

2. Signing more franchise agreements than you can manage to open.

3. Using franchise development revenue to support other parts of the franchisor’s business, like meeting payroll.

4. Making revisions and multiple variations of the license agreement to sign more agreements.

5. Signing an agreement with anyone who “Has the money and can fog a mirror.”

6. Not doing enough due diligence on and with your candidates.

7. Looking for candidates who want your franchise.

Sharing these with you enables us to bring you the positive side. If you have done some of these, or maybe all of them, and didn’t know any better then you don’t need to hold yourself accountable for what you didn’t know. Helping you move forward with your system and improving the quality and quantity of candidates you bring in is the goal of this blog.

Proven Way #1: Identify who your ideal candidate is and spend all your time with them.

This may seem like a no-brainer to most. You are probably saying to yourself: “We have this done and it doesn’t work.”

The truth is, most franchisors do not revisit their candidate profile often enough, and they do not build their qualification process around their profile. It is a good idea to revisit both your candidate profile and the qualification process every 18-24 months. If you don’t it is probably not working. The profile of your candidate changes as your brand grows and matures.

  • Here are a few of the questions we use to help our clients develop their candidate profile:
    • What are the candidate’s “must haves”?
    • Do they have enough resources to be successful (money, time and drive)?
    • Do they need a certification to operate your business?
    • Do they need to be an operator of the business or do they need to have an equity partner running the business day to day?
  • What are the “like to haves”?
    • Business experience?
    • Support from their loved ones?
    • Operate in the territory they live?
    • Be outgoing and charismatic?
  • What are the deal breakers?
    • Do they have any felonies?
    • Are they positive during your interactions with them?
    • Are they available when you set an appointment to talk with them?
    • Do they follow your qualification process?
    • Do they talk about what they don’t like about your business and make suggestions on how to do it better, as candidates?

Proven Way #2: Knowing what it actually and really costs you to grant a franchise to a candidate.

We have asked this question to every client of ours, and 85% of them do not know the real number. It is seldom franchisors have figured out the real number. They often forget the hidden or overlooked costs in granting franchises.

Let’s agree that unless we want royalty revenue to cover the costs of everything between signing the franchise agreement and the first royalty check, then the initial franchise fee probably is currently not enough. Here are some of the items we suggest be included in accurately calculating the initial franchise fee based on the costs associated with signing a new franchisee:

  • What is the overhead (salaries and bonuses) associated with your franchise development department and the supporting departments, and other involved personnel (i.e. Executives, Marketing, Operations, Training & Development, and Pre-Opening)?
  • What are the annual legal fees incurred for registration, signing an agreement, etc.?
  • What is the annual marketing spend including website?
  • What are your consulting fees (if any)?

To have a successful franchise development department helps everyone understand the importance of signing qualified candidates and not spending time with unqualified candidates we hope we can convince to become our franchisees. It helps everyone become realistic and focused.

We suggest you calculate these numbers for the past 3-5 years and divide it by the number of franchises you granted during that time and compare this number to your initial fee. Did you lose or make money? Are royalties supporting franchise development? The initial franchise fee is supposed to cover the costs you incur in putting your candidates into your business.

Now you have to decide if you are going to create a budget to meet your goals, or create your goals based on the available budget. For established franchisors it is much easier to create the budget to meet the goal, as a younger franchisor you will often have to be realistic and set your goals based on what you can afford.

Proven Way #3: Create a process and do not deviate from your process.

It is the age-old idea that salespeople close deals, the sales process doesn’t close deals. This was true when the person was the process rather than being part of the process. Bringing individual personalities into the sales process is as important as having a great personality on the first date. The goal is the same as franchise development: get a second date, and a third, and a fourth, and a fifth, and then get married. Franchise development is the same. But it is important to have a process to follow helping the candidate want to become your franchisee.

What the process needs to include:

  • Sharing of information on both sides.
  • Structure, so you and the candidate know exactly what you are both getting into and what the obligations and accountabilities are for all parties, so you and the candidates know if you both want one another.
  • An outline for how you both will make an informed decision.
  • A time frame for each party to make their decision.
  • A mutual understanding of franchising and why your brand is using franchising as a growth strategy.
  • An understanding of the candidate’s personal goals and how becoming your franchisee will help them accomplish their personal goals.
  • What it is like to be a franchisee and what decisions they can and cannot make as your franchisee.
  • It needs to be about the candidate.

I truly hope these ideas can help you and your brand improve your franchise development process. With patience and an eye for greatness, we can all achieve our goals. Call us with questions about information in this blog.

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