Having acted for Franchisors since 1995, IP Partnership has just about heard it all. Everything from Franchisees shutting up their shops in the busy Christmas period and walking away from their businesses on New Year’s day (true story) to Franchisees who have been so successful in their businesses that they are invited in to be shareholders of the Franchise System.
There are a number of stories from our Clients; however, the story that is more recurring is “we recruited the wrong franchisee”. The biggest mistake a Franchisor can make is getting the wrong Franchisee to be part of the business.
We understand how it happens, though. It can be hard for a business owner that has recently turned into a franchise to turn away a delicious cheque looking back at them from a boardroom table. The Franchisor generally knows that this person is annoying, but “hey”, they tell themselves, “with a bit of training and some support, they could work, right?” trying desperately to convince themself. The lack of business experience, the lack of industry experience and the lack of interpersonal skills are things that can be ignored because they don’t lack money and “that cheque that would be so useful for marketing right now!”
So they sign them up, they provide training, they get them out there running a franchise, but before long, the phone calls start… and then they don’t stop. The Franchisor provides as much support as possible and, trying desperately to remain calm, redirects them (for the 25th time) to the Operations Manual (which answers literally every question that is being asked) …and then all of a sudden it’s quiet. The Franchisor breathes a sigh of relief and figures the Franchisee must be actually getting off their lazy rear end and working on their business instead of complaining the whole time.
Nope. It’s quiet because the Franchisee has gone and seen a litigation lawyer who is rubbing their hands together – their pupils literally morphing into dollar signs the more the Franchisee complains about his struggles to operate a business – and the litigation lawyer points to the Franchisor and says, “it’s your fault our client’s business is not doing well.”
The Franchisor rue the day they ever picked up that cheque taunting them a little way ago, and realises they have recruited a difficult franchisee (we have heard Clients call them other things, but ‘difficult franchisee’ will do).
Franchisee selection criteria is by far the most important aspect of being a Franchisor. Ensuring the person is not only the right fit for the task but also not a moron or a complete (insert apt noun here).
Now don’t get us wrong. IP Partnership have acted for many, many Franchisees who have fallen victim to some extremely horrible franchise systems (readers would know the businesses we are talking about – you know, those awesome places we loved that then turned horrible and poor Franchisees were stuck still trying to operate a business with a name that had been dragged through the mud – and yes we have kept that as vague as possible so as not to be sued). We have also acted for Franchisees who have bought into blatant scams and have been successful in having those dodgy operators appropriately dealt with by the ACCC. But the ‘difficult franchisee’ is different.
The difficult Franchisee we are talking about here are the ones that are just too lazy to get up and give it a red hot crack. Conceptually they have not quite realised they are not an employee, but rather, they are a business owner with the responsibility to run their own business. These are the ones who need their hand held when they ‘turn the key’, and are the ones that are a complete pain in the rear end for Franchisors.
The answer. Avoid them. Our advice to new Franchisors, based on years of listening to our Clients face the same problem, is to make sure you have a very selective recruitment process to ensure that the good ones get through and the other ones don’t. Leave the cheque on the table and walk out of that recruitment meeting with your head held high because future you is saying “thank you!!”.
The other top mistake – and it’s a lot shorter to explain – is site selection. If the Franchise system is a brick-and-mortar business and you, as the Franchisor, are involved in approving the site (which you should be), be very careful to ensure the site is acceptable. The site at one shopping centre may be going gangbusters, but that does not mean a site at every shopping centre across Australia will go gangbusters. Franchisors need to think about demographics, competitors, socio-economic data etc and the list goes on.
In short, for Franchisors, it’s all about choosing the right person and choosing the right location.