Guest Post: Before Selecting Franchise Partner

This is a guest post by Shaloo, who managed and supported more than 60 franchise partners in a beauty and wellness education training company. The company is one of the largest in beauty education in Asia. She was in the core team when the organization reached from 3 institutes to above 80. Hence, she is a pioneer and has pragmatic knowledge of the industry.

Franchisee network is undisputedly the fastest way to grow your business. However, as a franchisor you have to be very careful in choosing the right franchise for sustainability of your business model and avoid litigation costs resulting from early exits of unsuccessful franchisees. Some key points before selecting a franchise owner:

Starting franchise network with Close friends or relatives:

The first challenge is to develop faith in the brand and find the first investor. therefore, it is common that the first franchisees are distributed to family, friends and close relatives. This may be a good head start but it comes with different kind of challenges as close friends and relatives often seek relaxation on either royalty fees or do not adhere to rules and regulations where any investment is involved. Moving ahead, it is important to include new investors as franchisees in order to bring competitiveness in the environment.

Choosing franchise with corporate job experience over entrepreneurial experience:

Entrepreneurs are usually fearless, risk takers and already involved in more than one business. They are often impulsive, and make comparison between return on investment and return in their businesses.If they do not get a good start initially they easily withdraw themselves and do not put required efforts to run their franchise. On the other hand franchise owner having corporate/professional job experience is tuned to put average 40 hours a week in work and also comes with substantial soft skills in order to handle the employee issues and motivating employees to achieve their targets positively.

Choosing investors from same industry:

Choosing someone who is just not looking for a business opportunity for return on investment but also passionate about the industry can add great value to the brand. These franchisees not only take less lead time to perform due to their trade expertise but also can be partnered in innovation and bringing new ideas to the table.

Choosing franchisees with adequate Working Capital:

Before allocating the franchise it is very crucial for the franchisor to assess financial standing of the potential franchise. Sometimes, the franchise takes time to generate sales in initial stages due to lack of brand awareness. A franchise with at least 7-8 months working capital will be a good choice because it is very often that franchisees with inadequate working capital breakdown soon. However, rejecting solely on the financial aspect is also not wise as some applicants come with a burning desire for success and have the ingredients to make it big, for such cases franchisors should have funding tie-ups with banks.

Franchise applicant profile assessment and background check:

Franchisors and their sales teams often get lured with initial fee payments, and to expand rapidly they tend to ignore due diligence of the applicant. This can cost the franchisor a lot as they go ahead with the wrong owner who brings a plethora of issues such as customer mishandling, employee turnover, destroying brand goodwill, unethical practices and the list goes on. The key to choosing your franchise partner wisely is by understanding whether your standards operating procedure and values of the brand will be carried in same or better fashion or not by the applicant.

 

Choosing the right franchise partner means low operating cost for the franchisor and an opportunity to invest in research and development to make the brand better for the future market trends and to beat the competition.

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