Signing Up Your First Franchisee

It is very important that you take great caution when signing up a franchisee. If the franchisee owner is lazy or undercapitalized, their franchise will fail. Once they have failed, they will be listed in your Uniform Franchise Offering Circular and every expert in franchise sales will counsel your next prospective franchisee to call them. The franchisee will most probably blame you as the franchisor for their failure. Therefore, it is important that you do not sign up franchisees that will end up blemishing your franchise’s reputation and prevent others from buying a franchise. With that said, what do you need to look for in potential franchisees?

Initially, you are looking for people who have both money and some expertise. Do not franchise to people who are novices and have no inkling on how the franchise business works. Franchise to people who know something about your particular business or industry as the chance of their success will be much greater. One way to make certain that the person qualifies as a potential franchisee is by offering the person a survey similar to the one prepared by the International Franchise Association and franchise consultants namely, “Is franchising for you?” This will give both the potential franchisee and you as the franchisor an idea of whether or not they qualify. If possible, do a financial background check on your potential franchisee.

When you have found someone interested, thank them for their interest, give them the necessary brochures containing information about your franchise and answer any questions they might have.

Once the person has conveyed interest and you have qualified the person as a franchisee, you will need to give them the franchise and business plan, the operations manual and the training programme.

When a franchise is bought, a contract will be signed and the franchisee buyer will pay an initial fee. After opening, you as the franchisor should continue to provide advice and should advertise and market the product name. The franchisee will normally pay a fee each month. You have the right to make visits to the franchisee’s business and to examine the accounting records. At the end of the contract, usually the franchisee can renew the contract but that is subject of course to you as the franchisor being satisfied with the franchisees performance.

Choose the right franchisee. If they succeed, you will succeed.

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