Are You Franchise Material?

The success of any franchise operation lies largely in the hands of its franchisees. The most successful franchisors are those who resist the temptation to take the money from the first person who expresses an interest in their business in favour of a careful selection process that will almost inevitably weed out unsuitable candidates.

 A description of the ideal franchisee based on conversations with people at different levels in the industry provides some clues as to why most businesses invest a considerable amount of time in the whole selection process.

 So how are suitable candidates identified? John Green, CEO of ChemDry says he looks for enthusiasm, a desire to take control of their destiny and leadership qualities in a potential franchisee. Because his offering is home based and requires a relatively low level of investment, it is less important to have previous experience of running a business than would be the case for other ventures.

 One characteristic they do require is the ability to follow direction. "Most of the people we speak to understand that the success of the franchise is down to following the formula - we tell them not to try and reinvent the wheel," he said. "They are investing in a proven method of doing business and they have to work within the agreed guidelines. Anyone who wants to do everything their own way would be more likely to start a business and then franchise it themselves."

 As a result he has no direct experience of people wanting to run the business their own way rather than taking direction. "It has happened elsewhere in the franchise community but the selection process does much to weed out any potential ‘lone-wolves'," he said. "A sound selection process is crucial - on average a franchisor has between 40 and 50 enquiries for each franchise offered."

 Not surprisingly, he could not come up with any examples of franchisees who have succeeded despite deviating from the master plan either. "We have strict quality control guidelines relating to the cleaning solutions, equipment and techniques used - if they deviate from these guidelines they won't achieve the results and we will bring them back in for training and ask them why they are not following the formula. There are grounds for termination for not following the guidelines in a properly structured franchise."

Green is quick to point out that the average failure rate is low across all types of franchises and claims that the most common explanation for failure is shortcomings on the part of the individual rather than the system. He says that the most common misconception is some people think they are buying a job for life rather than a business where they are responsible for all aspects of the operation.

 "If you are in regular touch with the franchisee and their records, you will get a clear picture fairly early if things are not going right," he said. "At that stage you will go in and find out what is not working. A franchisor will always do his or her best to help someone. It may come to the stage where they won't do it right and it is best to part company, but a good franchisor will always work with the individual as it is in the interests of both to see them succeed. Other franchisees see these efforts as evidence of the franchisors commitment, while there is time and effort involved in getting someone else up to speed on the business."

Sherry FitzGerald Countrywide (the group's franchise division) looks for people who are sympathetic to the way it does business, explained director Triona Gorman. "We don't need to have to convince them of the way we work - they need to believe that the way we do things is the right way. They need to be ambitious and not see the business as an easy way of making money."

 Because of the diverse customer base for its services and the variety of properties it sells, the company's franchises place more emphasis on the person involved than those offering commodity products. "Candidates generally need a background in property, although in some towns where the right person has come along we have gone for greenfield candidates," she said. "They also need high levels of integrity and ethics."

Because auctioneering is particularly brand oriented, Sherry FitzGerald cannot afford to accommodate mavericks. "We expect to reach a stage where expectations rise and some franchisees will think they can do it themselves, but we have never had a serious problem because the value of a brand in this business is very high," said Gorman. "There is some leeway for individuality but franchisees are bound by ethical and legal conditions and no one can succeed if they don't adhere to these conditions."

 According to Paul Fagan, master franchisor for ActionCoach and Aussie Pet Mobile in Ireland, the principal qualities of a suitable franchisee are not dissimilar to those needed for making a success of a business from scratch. "They need to be passionate about their success and put hard work before lifestyle, particularly at the beginning. They need a very specific vision of where they want to go with the business."

He says entrepreneurial spirit can be harnessed within an overall structure. "We encourage this characteristic and give them an opportunity to make a difference. There are entrepreneurs out there who ask ‘How can I maximise the system and make it work for me' - they are perfect franchisee material."

Fagan suggests that not following the system and lack of focus are the most common causes of failure among franchisees and he believes that in most cases the blame lies with both parties. Lack of support from the franchisor, failure to monitor if the franchisee is following the system and selling the franchise for the sake of making a sale, are all factors that can lead to failure, while lack of working capital is identified as a common failing among franchisees.

Of course, there are other reasons why individuals exit franchise contracts. "Some people dismiss the concept, which is a mistake," he said. "Some leave because they want to do the business themselves rather than having failed in the franchise structure - you could describe them as latent entrepreneurs - and sometimes the franchise does not grow as quickly as the franchisee, particularly where it is a new business."

In light of these comments, it is no surprise to learn that ActionCoach has a defined support structure in place for its Irish franchisees. "Each franchisee attends a 12 week academy in addition to their initial training," explained Fagan. "They talk to one of our business coaches once a week (initially on a daily basis) and we have key performance indicators that tell us how much activity is taking place. This is a strong early warning system that will prompt hands on support."

First published in Franchise Options Magazine© to order back issues please call 01 6611660