Choose Your Franchise Partners Carefully!

Note to franchisors—scroll down to “Franchisors should do the same”

1) The candidates

As a potential franchise owner, it is incumbent upon you to do your research and read the fine print before you sign a franchise agreement. There are several reasons for this. The biggest reason, perhaps, is the realization that owning a franchise is more than “buying yourself a job” as some people like to think. Small business ownership isn’t a 9-to-5 job; it never has been. It’s 24/7.

It’s important to understand and like the industry you’re considering. Do you really want to run a restaurant? Do you know enough about tools and DIY projects to run a hardware store? Do you like dry cleaning other people’s clothes, or cutting hair? Could you spend your life cleaning up after a disaster, a suicide, or a murder? (There are franchises for that.)

When done right, franchising can become a lifelong endeavor, one that can go from a local “mom and pop” shop financed by a second mortgage on your home or at the expense of your child’s college fund, to a multi-unit operation that becomes a family legacy, or even becomes a publicly traded enterprise.

There’s plenty of available information out there about the best and worst franchises to invest in, including the percentage of franchise failure rates, loan defaults and business closures. There are articles concerning “unfair” franchise agreements and/or franchisors who don’t honor a franchisee’s designated trade area and allow competing franchisees to intrude on another’s territory.

In a nutshell: Pick your franchise partner carefully.

2) Franchisors should do the same

Some franchise companies can lose sight of why they started in the business in the first place. Some of the best-known franchises started as a single business and grew because they were good at their chosen endeavor. But they can lose their sense of purpose when they turn their attention away from what motivated them in the beginning (making great burgers, delivering pizza quickly, providing customized home remodels, replacing tires so people can get back on the road) to focus only on royalties and franchise fees.

Franchisors not only need well-capitalized franchise candidates; they need individuals who love the industry, hard work, and have some business acumen. They need to understand what they’re getting into, and they must have the ability to meet the brand’s standards. These are givens.

What franchisors sometimes overlook is that they need franchisees with character.

Franchisors sometimes get so caught up in growth goals and the collection of royalties and fees that they grant franchises to anyone waving a check. They are blinded to the extent that they entrust their brand name to people who haven’t earned the right to be trusted. Then they act surprised if that franchisee fails or gets into trouble and drags down the brand’s reputation.

Franchisors should interview candidates (more than once, like a job interview). They should conduct background checks and verify references. Yes, it adds a bit more time and complexity to the process, but the investment can help prevent a problem that could have been avoided.

Brand names are built over time, but can be damaged in a moment, because of a franchisee’s mistreatment of employees, or their fighting back against a legitimate customer complaint. That’s not to mention ethical or legal breaches such as “skimming the till” and underpaying royalties, sexual harassment of employees, or other abuses.

Franchisees lacking character have been accused of mistreating their employees, abusing them, treating them as property, such as the franchisee of a major global chain who designated his franchise a “no-quit” restaurant—somehow thinking his employees no longer had the right of free will, and that they couldn’t quit unless “approved by management.” He somehow believed that he “owned” them.

Some will cut corners so much that the safety of their employees and their customers is compromised. The list could go on, but the point is this: The franchisor-franchisee relationship should be considered sacred, something that goes beyond the standard franchise agreement. The emphasis should be on the relationship. The best way to achieve that is to do the hard work up front, so that your partnership is mutually beneficial and can last for years to come.

Tim McIntyre spent more than 35 years working for a company that eventually became the largest practitioner in its category. The insights in this article come from more than 40 years of experience in journalism, communications, public relations, and crisis management. Looking for an honest assessment of your vulnerability to a crisis? Need a workshop for your leadership teams or franchisees to help them understand their role in crisis prevention? Check out his “What Could Go Wrong?” page at www.tmcommsllc.com for a list of scenarios companies can face.