The vast majority of franchise systems employ a recruitment process to both obtain expressions of interest from prospective franchisees, and to qualify those franchisees prior to entering into more substantial discussions surrounding their entrance into the system. This recruitment ‘funnel’, is a critical element in any franchise system. From a franchisor perspective, it ensures the prospective franchisee is suitably qualified and has adequate resources to take on the franchise, and from a prospective franchisee’s perspective, it provides a number of stages where they can get a better idea of the obligations and culture of the system, prior to committing themselves to the franchise agreement.
We often explain to clients that franchise relationships should be seen as akin to a marriage. In this context we describe to our franchise clients that the franchisee recruitment phase should be seen as the ‘dating’ phase, where both parties can decide whether the other is a good fit, prior to the ‘wedding day’ where the franchise agreement is signed. The better and more comprehensive the dating phase, the more successful the marriage and the lower the likelihood of a messy divorce.
This series of articles will outline the various steps involved in the ‘ideal’ franchise recruitment process.
Step 1 – The ‘Tinder’ step
Keeping with the dating theme, we encourage franchise clients to market broadly to prospective franchisees to ensure the best possible audience. The focus at this stage is ‘lead generation’, with these efforts commonly including franchise shows, social-media and traditional marketing, and specific advertisements in industry publications. As is the case with ‘Tinder’, franchise systems will commonly provide limited information to prospects with a view to providing enough incentive for them to investigate further. The benefit of franchise shows is that representatives of the franchise can engage directly with prospective franchisees (who, by simply being at the show, can be seen as a qualified lead). At this stage, prospective franchisee’s can be given a basic questionnaire which, depending on the system, can provide the franchisor with information including the prospect’s level of experience, level of proposed investment, and time-frames as to when they intend to make a decision. An important developing method of franchise marketing is to include specific sections on the franchise systems website whereby prospects can enter their information (including answering basic questions), afterwhich they will automatically be sent general information on the system. The goal at this stage is get as many prospective franchisees as possible (via as many avenues) to express interest, with a basic qualifying data, so that appropriate and targeted follow up actions can take place.
Step 2 – The approach
Having obtained expressions of interest, the next step in the recruitment process is contacting the prospect directly and confirming (or otherwise) their intentions. It is an unfortunate fact of life that many franchisors neglect this critical stage and either don’t follow up at all (and hope the prospect contacts them), or put pressure on prospects to commit too soon. Instead, this step should be viewed as an opportunity to further qualify (or disqualify) prospects, and an opportunity to begin to develop the relationship. The franchisee should be encouraged to convey their expectations, and provide further informal information about their experience, qualifications and resources. Similarly, the franchisor should be in a position to provide further information about their expectations of franchisees, and the opportunities available, and what other steps are involved in the recruitment process. As this stage generally occurs prior to the parties entering into a formal non-disclosure agreement or ‘NDA’ (as forcing prospects to sign anything too soon has the risk of spooking them), franchisors should avoid providing any information specific to the machinations of the system, or details of other franchisees.
Step 3 – First date
If both parties are comfortable to proceed, it is at this point that the franchisor should request the prospect to enter into an NDA, The NDA will normally include provisions preventing the prospect from using information obtained from the franchisor for their own purposes, it should also include protections for the prospect that information they provide as part of the recruitment process will not be used by the franchisor except in relation to the process itself. Once the NDA is signed, franchisors commonly require the prospective franchisee to make formal application. It is important that this application be as comprehensive as possible to allow the franchisor to make the appropriate assessment of the suitability of the prospect, both personally and financially. It is critical that the application is tailored to the particular system to ensure the prospect has the knowledge, skill and investment necessary to be successful.
Along with basic biographical information (including education levels and qualifications), an application should include questions about a prospect’s experience in a particular industry or about the prospect’s goals, including whether they would be interested in owning multiple locations. Additionally, the application should include enough detail to enable to franchisor to conduct appropriate background checks, including information on past employment, education and qualifications, references (both professional and personal) and, importantly, credit/bankruptcy and litigation history. If the prospective franchisee is likely to be an existing company, information on company directors should also be obtained.
In order to conduct these background checks clear and express permission should be obtained from the prospect. In applications that we prepare for our franchise clients, prospects are required to positively indicate their consent to these checks through ticking a box confirming their acceptance. Where the franchisor intends to engage third parties to conduct checks on the franchisor’s behalf (which is always our advice), this should also be explained to the prospect in the application and consent process.
Prospects are often uncomfortable in providing too much information, and are regularly apprehensive about background checks. This is entirely normal and reasonable. In these circumstances, franchisors should reassure prospects that such checks are necessary to ensure that the prospect is the right fit, which in the long runs, will be beneficial to both parties. If a prospect is particularly reluctant to provide certain information, or refuses to provide consent to background check, franchisors should consider this as a ‘red flag’, and make a decision whether or not to proceed with the application.
Having received the application, and obtained the relevant checks, franchisors should apply an objective standard to assessing that application. Particular questions can be given particular emphasis (or ‘scores’) with other questions seen as mere back ground. Similarly, responses to background checks can been assessed as ‘compliant’ or ‘non-compliant’ with the franchisors objective standards. The goal of this process is to assess applications into particular groups. It is a matter for franchisor to decide what constitutes these groups, but once determined, objective assessment of applications into these groups should be maintained. Sophisticated franchise systems, and franchise recruitment consultants, will often have advanced processes which assess prospects on various categories, with overall recommendations. However, at a more basic level, these groupings will include ‘highly suitable for further processing’, ‘suitable for further processing’ and ‘not suitable for further processing’.
The purpose of the application process is to ensure that only prospects most likely to succeed in the particular system are identified for further processing. The steps following this talent identification process will be looked at in further articles, and include steps such as interviewing, psychometric testing, and suitability analysis.
We joke about the relationship between franchisors and franchisees being a ‘marriage’, however the analogy is sound. Successful relationships between franchisors and franchisees commonly include firm commitment to the basis of the relationship (the franchise agreement), but also require a degree of understanding, flexibility and compromise. Just as in a marriage, the respective partners would be well advised to ensure they are compatible prior to the wedding day. In the franchise context, the success of the franchise ‘marriage’ is often contingent on the work put in during the franchise ‘dating’ phase to ensuring compatibility prior to entering into the franchise agreement (the franchise ‘wedding day’).
The initial stages of the franchise recruitment process are critical to a franchise system’s development and growth. While many franchise systems believe it to be just another sales process, the difference is that if it is not done correctly, the impact can be far greater than a simply ‘bad sale’. Just as sales system apply a ‘funnel’ approach, franchisee recruitment should be seen as offering a wide funnel (to capture as much interest as possible), but one that narrows sharply to ensure the best qualified prospects are identified and serviced quickly and effectively. Franchisee recruitment is a resource intensive activity, so franchisors should limit waste by only focusing their efforts on prospects most likely to become successful and valued members of the franchise system. The quicker they can identify these prospects, the smoother the process becomes.
Established and appropriate systems have the ability to enhance a system, while poorly designed and executed systems have the ability to jeopardise a system.
Stayed tuned for more articles on the steps in franchise recruitment.