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What are franchisors looking for in franchisees?

Written by: Diarmuid Kieran

Article Overview: The qualities and attributes franchisors should look for in would-be franchisees.

What are franchisors looking for in franchisees?

When franchisers meet with potential franchisees, they will be looking for certain personal characteristics to judge whether they would be suitable to run a franchise or not.

It is very important that people wanting to be franchisees have enthusiasm for the company and are confident that they can help to continue its successful expansion. Therefore, a good understanding of what the franchiser does and how it operates is essential.

Even if the franchiser has not directly asked for a business plan, it is advisable to produce a document outlining how the business would go about raising its profile to attract customers and staff and some of the goals to achieve in the first few months and years.

Although an optimistic outlook is valuable, potential franchisees need to acknowledge that in the early stages it is unlikely that large profits or in some cases any profit will be made. Franchisers will want to know that their franchisees will not quit at the first signs of poor financial results.

They must also make it clear to the franchise company that they know they are chiefly responsible for the success or failure of their franchise.

Another key characteristic to have is being a good communicator, as a franchisee needs to deal with the franchiser, staff, suppliers and customers, otherwise it will be difficult to be successful.

Being able to effectively interact with people and explain things in a clear and straightforward manner will create loyalty, value and trust.

When talking to potential franchisees, franchisers will also be expecting a number of questions to be asked to demonstrate a great willingness to learn and seek help when needed, as opposed to believing you know how to run things with little assistance.

Each franchise company is different and so potential franchisees are advised to enquire about any unique practices and systems at the first meeting if they are not told about them initially.

Ideally, they need to show a balance between working on the development of the individual franchise and functioning as part of a team.

Ideas for improvement are welcome as long as franchisees are aware that they need to use the business systems and practices of the franchiser, which have enabled it to expand. They need to accept that decisions made on changes to each franchise are for the benefit of the whole franchise family.

In addition, it is important for potential franchisees to show that they will value their employees.

This is because a belief that employees deserve trust, a degree of responsibility and the chance to offer meaningful contributions to the business is very likely to make them more productive.

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Re: Franchise skills - [quote="saraloves":1n1pw9z6]Why would you be looking for franchisees without technical skills? You're a computer services company, right?[/quote:1n1pw9z6] Because franchisees don't have to be the technicians. In many cases the franchisee is the "business man", here to create and grow the business, not to operate it. If you look at Subway, many of their franchisees own several stores and I can tell you they are not the one making your sandwich. They are business men.
Information about doing franchise business in China - CHINA’S FRANCHISE LEGAL SYSTEM Introduction Franchises has a history of more than one hundred years in foreign countries, now it has developed to be a mature business mode, and it is widely used in many countries, especially the developed ones. Recently, franchises has been developing fast in China, covering more than sixty industries and trades such as catering, retailing, clothes-washing, indoor decorations and gym. However, the market order of franchises is chaotic in some industries and areas. There are also some illegal and criminal activities under the guise of franchises. Under such circumstances, several important laws have been promulgated to regulate the commercial franchising activities. 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It seems that the Ministry of Commerce has restrictions in recognizing trademarks, since it only provides “own trademarks to be licensed to others” at large, which causes chaos in practice. In the cases relevant to franchising disputes which we provided legal service to, all of them involve the situation that the franchisors granted licenses of non-registered trademarks or the trademarks which were in application to others, and when there was infringement on trademarks, the franchisors were unable to prevent infringement on trademarks. Then the interests of the franchisees could not be realized. What’s more, franchising activities with non-registered trademarks also, to some extent, encourage commercial frauds. Thirdly, the logos, patents and proprietary technology of enterprises are included in the business sources to be licensed to others for the first time, which enlarges the application scope of franchises and will improve the development of franchises. Requirements to be Met in Carrying on Franchising Activities In addition to the condition that only the enterprises will be allowed to carry on franchising activities referred to above, the franchisors shall also have mature business modes, and are able to provide business guidance, technology support and training. The enterprises which copy the manuals, websites and enlisting documents of others, and have no service abilities for providing business guidance, technology support and training shall be excluded. What needs pointing out is that even these enterprises that are allowed to carry on business may face with the suits claiming them for unfair competition and infringements on intellectual properties. In addition, the Measures clearly request that the franchisors shall operate at least two directly operated shops, and the period of operation shall be more than 1 year, which aims to prevent frauds by the way of franchising. 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To the franchisors that violate these provisions, the authorities in charge of commerce will order them to rectify, charge penalties and make public statements. Archival Filing and Public Announcement Systems To protect the franchisees’ lawful rights and interests, considering the asymmetric information between franchisors and franchisees, in addition to intensifying information disclosure requirements and regulating the activities of franchisors, the Measures also bring in the archival filing and public announcement systems. The Measures provides that the franchisors shall make a filing with the commerce administrative department within 15 days after the execution of franchising contracts for the first time. Anyone who intends to engage in any commercial franchise activities within a province, autonomous region, or municipality directly under the Central Government shall go through the archival filing formalities in the commerce administrative department of the people’s government of the province, autonomous region, or municipality directly under the Central Government where the franchisors are located. Anyone who intends to engage in any commercial franchise activities beyond a province, autonomous region, or municipality directly under the Central Government shall go through archival filing formalities in the commerce administrative department of the State Council. Any franchisor having been engaging in franchise activities before May 1, 2007 shall apply for archival filing at the commercial administrative department. The Ministry of Commerce has established the national network for archival filing work relating to commercial franchise. Any franchisor shall go through the archival formalities through the government website. The general public may obtain the following information through the government website of the Ministry of Commerce: (1)The registered trademark(s), enterprise mark(s), patent(s), know-how and other business resources of the franchisor; (2)The franchisor’s archival filing date; (3)The location of the legal business place, contact information and name of the legal representative of the franchisor; and (4)The location of the business place of the franchisee(s) within China. The authorities in charge of filing will cancel the archival filing if there is any following activities of franchisors, and make public announcement on the government website: (1) the business licenses of the franchisors have been withdrawn by the registration administrative authorities for illegal business; (2) the authorities in charge of filing receive judicial suggestion letter on cancellation of archival filing from the judiciary for illegal business by franchisors; (3) the franchisors conceal the relevant information or provide false information, which has been proved; (4) the franchisors carry on cancellation by themselves. In addition, the illegal activities of the franchisors will be announced to the public. By Erex Chen, a Chinese lawyer based in Shanghai.
Re: Which franchise would you buy? - Hi Kevin, On a silly and romantic level I would just like to be involved with a football franchise, preferably my beloved Newcastle United FC who I have supported since I was a little boy and they never win anything. Unfortunately football clubs are not a franchise in the UK so that is unlikely to ever happen, SOB. On a more serious level, all I would say to anyone thinking of a franchise is to research, research and research again. You have to remember that franchisors are trying to sell you a package which in many cases is a very expensive one. They will give you names of existing franchisees who may or may not be hand picked but the most important advice I would give anyone is to agree the costs going forward and not just the up front costs. Franchises demand a lot of hard work and effort over time and if you already know the industry you will be working in then fine. Many years ago I had a franchise selling brilliant cleaning chemicals from the back of a showroom vehicle which was great except that I could only buy the chemicals from the franchisor and after a few years of rising prices I had to fold the business because the cost of buying the chemicals meant my profit margins were too small to carry on. It was a very sad decision for me because I loved the lifestyle and the industry that I was working in even though I was usually working a 10-12 hour day and doing paperwork at home as well. If I did the same again I would do it with a contractual agreement to fix my costs for the first two to three years while I was building the business but it’s easy to say that with hindsight. There are some very good franchises out there but remember that franchisors are selling you a package. If your business fails they will just sell the same package to the next person who takes over your patch and you have lost your money so it’s very much buyer beware, regards, Mal.
Buy a franchise, get 4 free! - I just called a franchise company (I'll keep the name for me) to ask them if they wanted to be listed in the upcoming edition of our top seller publication, the Bond's Franchise Guide. I knew I was gonna be a hard sale. I met the franchisor at the International Franchise Expo in DC a couple weeks ago and he's one of these guys who wants the world for free. I hadn't had the time to tell him about the price that he went "listen, I have a great deal for you. You give me a free listing in your Guide and I'll give you a free franchise!". I then remembered seeing on his booth a "marketing message" saying "Buy 1 franchise, get 4 Free". Basically, you buy the rights for a territory and they give you 4 other territories for free. I kindly declined the offer, trying to be as polite as I could to not offend this man. I knew I was wasting my time with him but I kept going anyways. For 5 solid minutes he tried as hard as he could to have me open a franchise in San Diego for free. I didn't want to confront him (after all, he's still a potential client) but I was saying to myself "what kind of franchise is that if you give it away to anyone and everyone?" This franchisor has only one thing in mind: opening as many franchise locations as possible. But he forgot one of the very basics of franchising: you have to have qualified franchisees... Duh! This means that because someone has the money doesn't automatically means he's going to be a good franchisee. Most franchisors are well aware of that. They'd rather see a very well qualified potential franchise buyer with little money than a totally unqualified potential franchisee with a lot of cash on hand. Those types of franchises usually don't last long. Why? Simply because the system starts collapsing from the inside: franchisees are not adequate for the system thus, they don't operate their store correctly. The brand image starts getting worse. The franchisor can't support its franchisees because he's too busy opening other franchises. Next thing you know, you're reading an article in the newspaper about how this franchise filed for bankruptcy. What do you guys think? If I come to you and say "if you buy a franchise, I'll give you 4 more for free". What would you think?
Re: What Franchisors Want From Franchisees - In my experience one of the things franchisors look for is the professionalism of a candidate. I have run across quite a few times where I had a candidate looking a certain franchise and the other person that was looking at the same territory made their decision first and my client was left without a territory. That being said, my client did make their decision, it was just a day too late, but we didn't know that at the time, so the franchisor went to the drawing board and without overloading the market figured out a way to create 2 territories by moving the 1 territory over and establishing another one. Both franchisees were happy and the franchisor got a 2fer. Talking with the franchisor afterward they told me one of the main reasons they did that was because of the responsiveness of my candidate. They say this was very professional and it wasn't just the $$ that made them create the additional territory, although I am sure that played a part, but they really worked with all of the existing franchise owners and the new one and my candidate to get this done.


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