The question of who will make a good franchisee is one which exercises
the minds of all franchisors. The statements below, plucked from
various franchise sales brochures and articles, quite clearly spell
out the overriding importance of franchisee selection:
- "Franchising is a partnership. A franchise's major asset,
once established, is its franchisees."
- "A model franchise company will recruit as franchisees
people who are not only qualified financially, but also by ability,
energy and enthusiasm to make the most of the opportunity available
- "Setting up a franchise is less difficult than managing
it later on - you have to live with your earlier mistakes and
a lot of those are people you pick when the urge for rapid growth
takes over from all other considerations."
Picking winners is not a simple task and the difficulties inherent
in the situation tend to be compounded by a number of additional
- Most developing franchises have much in common with the typical
small firm in that they have only a few key staff members undertaking
a multitude of tasks. These may be very able and committed people
but, usually, none of them is expert in the field of personnel
selection and management, which is the relevant specialism here.
- Some franchisors may feel that they can rely on 'instinctive'
or 'gut' feelings to signal good or bad franchises prospects.
Just as few people would admit to being a bad driver, so they
feel it reflects badly upon them to admit to difficulties in selection
- Very often people fall into the trap for looking for people
exactly like themselves when what they may be best advised
to do is look for people who complement rather than duplicate
their own abilities and weaknesses.
- Inasmuch as franchising is a team effort, one of the key front
line teams is the franchisee husband/wife team. If this team is
not operating effectively, then a source of potential strength
can descend into a weakness.
Costs & Conversions
For businesses having 4 or more years experience of franchising,
research has indicated that nearly 60% report an average recruitment
cost in excess of £5,000 per franchisee (1994 prices).
This cost is a reflection of appreciable numbers of applicant rejections
and most of the more professional franchise companies convert no
more than 4% of initial enquiries for franchise prospectuses into
sales. Even this is judged by some to be, if anything, on the high
side with 2% being a better target figure. But why should this figure
be so low?
One reason is that self-employment is a pipe-dream for quite a
large army of people who like to indulge in 'half-way-house' experiences.
They may subscribe to small business magazines, attend seminars,
join business clubs and, in this way, get an arm's-length thrill
of a 'share of the action'.
Some of these people may, eventually, take the plunge, should they
lose their job, or come into money, etc. But, in the meantime, they
are not serious prospects.
Another reason is that self-employment is a widely held desire
in our society, albeit one that is often associated with very little
knowledge of precisely what is involved. Grand notions abound of
independence - 'doing your own thing', 'no one looking over your
shoulder', 'being able to play a round of golf midweek when the
course is empty'. Thus, the bait is strong enough to at least initially
interest a great many people.
Finance is often thought to be no great problem by potential franchisees
since, as they see it, the clearing banks exist to address precisely
this problem. However, many prospects will never have raised bank
loans before and the idea of having to offer security or collateral
(their house perhaps) can often come as a shock to them.
Some psychologists have made an industry out of attempting to devise
tests which will predict those likely to make a success of running
their own small business and those who are unlikely to do so. Whilst
success in the field of psychological profiling here has been very
limited, it is perhaps worth mentioning a couple of the more hopeful
Probably the best known is that associated with Professor McClelland
and his attempts to measure 'achievement-need', or 'the desire to
do well for the sake of an inner feeling of personal accomplishment'.
In the 1960s this was used in many countries for selection and training
purposes but, after some initial claims of success, has come in
for increasing criticism.
Another psychological test is the so-called 'locus of control',
which is based upon the proposition here that potentially entrepreneurs
will have a high 'locus of control' or, in other words, believe
that they can control their own behaviour and that their behaviour
determines what happens to them. Put simply, this amounts to a belief
that they control their environment rather than the reverse. Again,
there have been some successes claimed here but locus of control
testing is still not widespread in the field of entrepreneurial
selection. Also, knowing that many people who become self-employed
have been 'pushed' by environmental circumstances, e.g., redundancy,
a locus of control test would not appear very appropriate.
There appears to be a common misconception amongst franchisors
that franchisees are very different animals from conventional independent
small business people. However, research shows that around one-third
of franchisees have previously been conventional small business
people and around half of all potential franchisees attending franchise
exhibitions have current or previous experience of conventional
Looking Through the Eyes of Potential Franchisees
It is important to keep in focus the goals of potential franchisees.
Their prime aim in life is not, and will never be, to make
your firm 'the biggest in its market'. Potential franchisees will
have their own goals and these will vary with their past
For instance, we now know that people without any previous experience
of self-employment have goals practically identical to most
other people in their situation. Thus, their main goal is the search
for independence and autonomy, achieved through structuring
their own time and efforts rather than being directly supervised
and controlled by others.
For potential franchisees with previous experience of self-employment,
the lure of franchising as a proven business system takes
prominence. Thus, goals such as 'security', 'access to a known tradename'
and 'business backup' assume great importance.
Some Guidelines for the Franchisor
Some franchise companies may wish to explore the possible advantages
of psychological profiling in depth. If so, they would be well advised
to seek specialist help. Short of this, what do the lessons of research
and management theory generally hold to assist the franchisor in
improving franchisee selection methods?
In a nutshell, they offer 3 main messages for the franchisor:
- First we know that people who have either first hand experience
of self-employment themselves or, alternatively, come from a family
which has such experience, are statistically more likely to take
up franchises than people randomly drawn from the population.
Thus, ensure that you are delving this question at an early stage.
- Make use of standard personnel selection techniques to ensure
that your interview and selection techniques are as scientific
as possible and protect you against subjective or whimsical judgements.
For instance, you should develop a proper franchisee role description
outlining the purpose, functions, responsibilities, conditions
and prospects linked to the role.
- Then, you should have a proper franchisee specification
which should outline the kind of person best suited to the role.
This document should be based upon the answers to 2 questions:
which attributes are essential in a franchisee and which
- In addition to the above, you should develop your own diagnostic
questionnaire schedule, suited to your own franchise operation
Whilst it remains true that there is no single foolproof formula,
or litmus paper test, that will guarantee a franchisor 100% success
in selecting good franchisees, the more scientific the approach
used, the better your choices should be, thus bringing long-term
benefits for franchisors and the franchise network. The remainder
of this article will concentrate upon assisting franchisors to develop
their own diagnostic questionnaire schedule.