Choosing the Right Franchisor: Experience Counts!

Let’s face it, franchising is about relationships, and that means it’s about people. A franchise candidate is challenged with the daunting task of wading through piles of marketing materials, legal documents and industry research. Often what gets overlooked is the quality of people who comprise the executive team at the franchisor headquarters. Sure, a franchisee usually meets the franchisor team during a Discovery Day visit, but who wants to get on a plane and visit a franchisor, just to find out that the company is being run by a slick car sales guy or tech support kid who couldn’t make it in their previous careers.

Obvious? Not quite. I work with franchise candidates every day, and I am astounded at the number of future franchise owners, who fail to check the profile of the people that run the franchisor entity. Usually, the franchise qualification process is focused on the franchise sales guy, but generally, that smooth-talking guy on the phone is not a person who will manage the franchise relationship moving forward.

Would you hire a manager without seeing their resume? Would you go into business with a partner without knowing his professional background? I wouldn’t.  For the same reason, you should not move into advanced discussions with a franchisor without knowing the profile of the executives who run the company.

If you are working through your due diligence, the following are six “must do” items for any franchise candidate…

Early in the process:

1. Do a Google search on the top franchisor management, (ignoring biased company press releases). Then log onto the franchisor's website and look at the executive bios to compare notes. If the Internet search doesn't find information on the executives, or the management bios aren’t on the website, it’s a red flag. Good franchisors are usually pleased to openly disclose the professional backgrounds of their executive team.
2. Many franchisors are listed on the Caleasi website of the California Corporations, so you can download their Franchise Disclosure Documents. What is listed under the “Business Experience” Section?
3. When speaking with the franchise sales guy, ask him to name the key executives, who manage the strategic direction of the company and the ongoing franchise support. Ask him: “What are their professional backgrounds?”  Compare the description you get with the online bio or the professional profile provided in the Franchise Disclosure Document. Any gaps or difference in information?
4. Look for tangible qualifications of the executives, such as an MBA, CPA, CFE (Certified Franchise Executive), etc.  Yes, it’s true that not all MBAs or CFEs are good executives, and not all executives have a fancy degree. However, a good education and training indicates an executive’s willingness to invest in their own professional growth and knowledge. If you believe in having a CPA do your taxes, you might want to ask what certifications your franchisor brings to the table.

Toward the end of the process:

5.  Any smart franchise candidate should make validation calls to existing franchisees. Be sure to choose randomly from the list of franchisees (avoid the franchise sales guy’s picks), and ask these franchisees probing questions about the franchisor’s executive team. Are the franchisor executives available to chat with you, or do you get relegated to non-decision makers? Do you trust everyone on the executive team? Do other franchisees have issues with the executive team?

6.  If you are ready to sign the franchise agreement, ask the CEO, COO and other key managers if they can provide you with professional references. A good executive should be happy to provide references, and it shows them that you are doing your homework. Then call up a few of their references, preferably people who have worked for them or franchisees that they’ve supported.

Okay, so you’ve found a great franchise concept with a top-notch young entrepreneur at the helm, who started the concept from scratch and built a multimillion dollar business. You saw the guy interviewed by Donny Deutsch. Who cares if he doesn’t have franchising experience? Who cares if he doesn’t have grey hair, (or in my case, no hair)? Who cares if he never went to college?

News flash… Successful entrepreneur founders seldom make good franchisor CEOs! Usually, when a “professional management team” is brought into a franchisor, the entrepreneur founder either exits or steps into an advisory role. Why? Generally, entrepreneurs are great at driving the heck out of their own business, but they often lack the organization and franchising skills to build a sustainable franchise organization. There are notable exceptions to this rule, but they are few and far between.

Yes, but what if the entrepreneur founder has “experienced franchise executives” around him, or is being advised by a guru franchise consultant?… Most people who have worked for an entrepreneur know that they usually like to run things their way. No matter how many experts are around them, the entrepreneur CEO will usually call the shots, regardless of the advice of their management team. I have worked for entrepreneurs, and I know other experienced franchise executives who have worked for entrepreneurs. These situations usually end up with the experienced franchise executive quitting their job out of frustration.

Don’t get me wrong. Throughout the history of franchising and to this day, entrepreneur founders play a very important role in establishing great franchise concepts.  One of my business partners is an entrepreneur and is an invaluable asset to my franchise. The best franchise founder entrepreneurs know that their enthusiasm and natural drive can play a positive role in a franchise, but they also know when to step aside and let professional franchise management run the franchisor business.

If you ask a prospective employee for their resume, you should ask the same of your franchisor. Best wishes in finding that perfect match!

--

Ray Hays, CFE, President & CEO of Doo Care