Beware of This Type of Entrepreneur When Franchising
Entrepreneurs are a key component of franchising. Aspiring franchisors put all their finances, relationships and energy on the line in the hopes of developing the next successful brand. But when these entrepreneurs successfully develop that brand and are ready to expand through franchising, we find ourselves in the ironic situation of advising them to avoid selling franchises to anyone that reminds them of themselves.
These words of caution are especially true for franchisors selling their initial franchises. Real entrepreneurs never saw a rule they did not want to break. And there is no worse time to award a franchise to an entrepreneur than when selling your very first franchise, as this franchisee will set the tone for each subsequent franchisee that joins the system.
Before going further, it is my belief that there is a real difference between entrepreneurs and those who have entrepreneurial spirit. Most franchisees need to exhibit entrepreneurial spirit if they are to succeed in the world of business. They need to be willing to take risks. They will typically have abundant self-confidence, dedication and tenacity.
Where a franchisor needs to be careful is with those true entrepreneurs who are such rule breakers and independent thinkers that they can’t help but want to eschew the system standards. The franchise vetting process should reveal those that could be trouble. Here are some red flags to look out for when dealing with entrepreneurs.
Starting numerous businesses
Someone who established multiple independent businesses over the years may well have the mindset that they do not need the help of a franchisor or might be used to the complete autonomy they had in the past.
Plans to change your system
“Have you ever thought of doing it this way?” This could be a sign that you want to be careful. Again, innovation from franchisees can be a good thing (it’s how breakfast got on the menu at McDonald’s, after all), but a candidate starting the validation process with these types of questions may not be willing to follow your systems.
Other 'rule-breaker' characteristics
Changing jobs frequently, a spotty driving record and less-than-stellar academic achievement might also indicate the candidate is too entrepreneurial.
Following your sales system
Given the complexity of the franchise sales process, most franchisors will break the process down into manageable steps. A skilled franchise development officer will lay out a process that the prospect must follow to be awarded a franchise on the first or second call.
As an example, your franchise sales program should include a set of tasks to be completed by the prospect. It could look like this.
In week one, complete a Confidential Information Request Form. In week two, be prepared to review the FDD. The weeks that follow will require the completion of other tasks. If a prospect will not follow that system, or complains about having to do so, it may be an indication that they believe they can do as they please without consequences.
And, of course, your franchise sales program should also include strategies to glean relevant information from your candidates. Do they constantly question your strategies? Do they suggest ways that you might do things differently and even argue the point?
Why it matters
The success of your franchisees will be the ultimate arbiter of the success of your franchise program. For emerging franchisors, the importance of the success of initial franchisees cannot be overstated. Those initial franchisees will need to validate for the franchisor when additional candidates enter the pipeline. Unfortunately, a marginal candidate who is awarded a franchise will also require more work from you, will be more likely to say bad things about you, and will pay you the least amount of royalties. If your system is really ready for franchising, those that follow the system to the letter will be those most likely to succeed.
The process of awarding a franchise is just that — a true screening process with many “right” ways to do it. It is not just about securing a check for the initial franchise fee; it is about entering into a relationship that will last for five, 10 or 20 years. If you select the right franchisees, you are much more likely to have the success of your franchisees drive the success of your system as a whole.