When a franchise is not a right fit

When a franchise is not a right fit

On Behalf of | Apr 28, 2021 | Uncategorized |

A franchise can be an excellent business opportunity, if handled correctly and the franchise candidate can bolster the brand. But effective franchising, like other relationships, requires that the franchisor and franchisee are a good match.

Be selective

The wrong franchisee wastes time and money. This may also harm the franchise brand.

Focusing on growth and being less selective can cause problems. These include distributors lacking working capital to effectively develop their sales teams or franchisees with insufficient business leadership experience. Franchisees may not recognize the corporate culture.

Vetting must include effective interviews. These should have talent assessments on whether the candidate would fit the franchise brand.

Warning signs

Poor financials are the most obvious indication that the franchisee may not be qualified. Undercapitalized candidates begin with a financial disadvantage that typically grows over time.

Candidates who are seeking opportunities above their experience level and their unwillingness to be team players are other disqualifications. Be cautious if candidates have franchise experience but say negative things about that experience and blame others for previous failures.

Candidates need to have a strong interest in the service or product offered by the franchise. Franchise candidates should be engaged in active management and not use the business as a passive investment.

A strong franchise candidate also believes and participates in community involvement. They should have a positive, optimism and a belief in giving back to their customers, clients, and communities.

Rejection

Candidates usually invest a lot of time and sometimes money into the franchise approval process. Rejection should be conveyed in person and not through an e-mail. The conversation needs to be personalized, clear and include reasons for their rejection.

Detailed feedback should be provided.  The process should involve empathy for the candidates.

An attorney can assist businesses with addressing the liabilities, disclosure obligations and other legal requirements for franchises. They can help protect franchisors interests in disputes.