How to evaluate the right Franchisee and Franchisor

Evaluating the right Franchisee & Franchisor

Finding a suitable franchisee or a rewarding franchisor is not a cup of tea for many. A franchisor and franchisee struggle really hard to find each other due to many reasons including lack of information, communication gaps, etc. 

For every other business, building a strong network is an essential thing as it helps in ensuring consistent growth in the business. And in a concept like franchising where everything is based on the relationship between franchisors and their franchisees, building network becomes more complex and difficult, both for franchisors and franchisees. At times, franchisors struggle to find the perfect franchisees and at other times, franchisees couldn’t find the most rewarding franchise for themselves.

In conversation with Franchise India, Dr. Anuj Kacker, President & Executive Director of Aptech Ltd. highlighted some questions that franchisors can ask themselves while evaluating a prospective franchisee. Also, he mentioned the key things that a franchisee should look for in a franchisor. He says, “Education is the business where two organisations come together for a common objective.”

How to evaluate prospective franchisees?

Here are some of the definite traits that a franchisor should look for in a franchisee:

An element of entrepreneurship

Most people tend to locate franchisees as someone who brings investment into the system. However, the core value proposition for a franchisee is Entrepreneurship. This is the key value-addition which the franchisee brings to the table. The entrepreneurship element which the franchisee brings and how good an entrepreneur is he is the key.

Involvement in the business

Is the franchisee able to involve him personally in the business? If he’s able to involve in the business, the chances of success become much higher.

Anuj Kacker states, “The ROI in the education business should not be defined at ‘Return On Investment’; it should be defined as Return On Involvement.”

Having a local knowledge

Local knowledge, geographical familiarity, language skills, or cultural familiarity is the third element that the franchisee should bring to the table.

The One Who Follows the System

An entrepreneurial spirit with a zest to treat the franchise as their own venture is a quintessential need of any aspiring businessperson. But, it is important to keep in mind the fact that one has to work on a proven model and has to follow a system that is pre-decided. The blend of entrepreneurial spirit and the ability to work under a pre-determined system is the most considerable requirement in a prospective franchisee.

Optimistic and Motivated

Like any other business, yours can also go through its ups and downs. In such a case, a person who continues to remain focused and has creative ways to handle challenges makes for a good franchisee choice. If you are not easily demotivated and can pass on the same energy to your team, are optimistic by nature, and a troubleshooter, then you can be an ideal choice for a franchisor.

How to evaluate successful franchisors?

The key things that a franchisee should look for in a franchisor include:

Is this company has the demonstrated model or is it still in the process of evolving a model?

Now, both ends of franchisors exist. There are people who are into the business just for 1 year and they start franchising. But the issue for the franchisee to evaluate here is that is the model robust or sustainable enough because that is what you are buying into. If the model goes its ups and downs then the franchisee will get affected in some way.

Business Experience

One of the first and most important things that a franchisee expects from the franchisor is “what is the business experience he is buying from the franchisor?” A franchisee expects to learn from the franchisor’s mistakes and should be informed about other failed franchise projects so that he/she would not repeat them.

Cultural fit has to be important

There has to be a cultural fit between the franchisee and the franchisor. The main question you should ask yourself is “What is the DNA for the organisation”. This is one of the key elements that a prospective franchisee should look into the franchisor.

“At Aptech, the DNA of the organisation is to build a relationship,” Kacker adds.

Past behavior of the franchisor

Another element to look for is the past behavior of the franchisor in various situations. Talk to other franchisors, how they have sustained themselves, how they have reacted in the situations of ups and downs.

Training and Selections

A franchisee expects the franchisor to provide the required training to his staff as well as him on how to run the business smoothly and to keep harmony in and around the surrounding. He/she also expect guidance on selecting the desired raw material to bring out fine products that the brand is known for.