5 Common Mistakes to Avoid When Recruiting Franchisees

Summary

• Franchisors should avoid panic recruitment by allowing sufficient time to advertise the opportunity and build a strong candidate pool, as franchisee positions require financial investment and attract fewer applicants than regular roles, making quality far more important than speed of appointment.
• Promising candidates should not be screened out early for lacking franchise industry experience, as key franchisee qualities such as professionalism, drive, and creative thinking are often more important than prior experience, and the selection process should be tailored to the specific franchise model rather than copied from other businesses.
• Franchisors should involve existing franchisees in the recruitment process to provide prospective candidates with realistic insights into daily operations, and must ensure sufficient capital is in place to cover recruitment costs, legal documentation, training, and ongoing franchisee support before the first agreement is signed.
• This article is a guide to franchisee recruitment for franchisors in New Zealand, explaining five common mistakes to avoid when selecting franchisees and how to build an effective recruitment process.
• LegalVision is a commercial law firm that specialises in advising clients on franchise law and business structures.

Tips for Businesses

Allow adequate time for advertising and recruitment rather than appointing the first available candidate, as rushed recruitment decisions are a leading cause of franchisee performance issues and brand damage. Develop a tailored selection process that reflects your specific franchise model and refine it over time based on existing franchisee feedback and performance outcomes. Ensure all legal documents, operations manuals, training programmes, and marketing materials are fully prepared and funded before the first franchisee signs the franchise agreement.

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On this page

• 1. Panic Recruitment 
• 2. Screening-Out Potential Candidates Too Early
• 3. Inadequate Selection Process
• 4. Overlooking Current Franchisees
• 5. Insufficient Capital 
• Key Takeaways
• Frequently Asked Questions

Recruiting the right franchisee is one of the most important decisions a franchisor can make, as each franchisee represents your brand and directly affects your network’s reputation. Avoiding common recruitment mistakes can save you significant time, money and legal risk down the track. This article will explain five common mistakes franchisors should avoid when recruiting franchisees.

1. Panic Recruitment 

Time constraints can be one of the most significant factors that determine whether you recruit the right franchisee or not. Indeed, you will need time to research and plan an effective advertising strategy to get in contact with as many potential applicants as possible. Conversely, if you spend too little time advertising the franchise opportunity, you may restrict yourself to a small pool of candidates.

You should also expect significantly fewer candidates for a franchisee position than for a regular job position. After all, your franchise opportunity will require more than a normal managerial position since a franchisee position typically involves financial investment and working capital to get started. For this reason, it is essential not to recruit the first person to apply. Instead, you should give yourself enough time to conduct the recruitment process carefully, prioritising franchisee quality over availability.

2. Screening-Out Potential Candidates Too Early

Not all candidates that apply for a franchisee position will have experience working in the franchise industry. Therefore, even though a candidate may be perfect for your business, it is hard for them to prove this during the initial stages of the recruitment process.

However, the traits of a good franchisee are often qualities that do not come from having qualifications or extensive experience. For instance, this might include traits such as: 

• professionalism; 
• drive; and 
• creative thinking. 

In this sense, you should not ignore potential candidates too early in the process because they lack previous experience in the franchise industry. Instead, it might be a good idea first to source as many relevant applicants as possible. Then, you can decide what traits make the candidate the right person for the job.

3. Inadequate Selection Process

Most franchisors will develop their franchisee selection and recruitment processes over time, learning from existing franchisees’ feedback and based on past franchisees’ performance. However, the selection process will vary significantly amongst each franchise model. 

While some business owners prefer a rigorous interview process, others might allow potential franchisees to spend time within the core business. In any event, you should tailor the selection process to suit your business needs rather than basing it on the selection criteria of other franchise businesses.

4. Overlooking Current Franchisees

Many franchisors forget that their current franchisees can be invaluable when recruiting new ones. As a result, some franchisors encourage prospective franchisees to get in contact with existing franchisees. This allows prospective franchisees to understand what it is like to own and run the franchise daily. In this sense, your prospective candidate can paint a more realistic picture of the internal workings of your business.

Your franchisees also know what it takes to run a successful business within your franchise network. Therefore, existing franchisees can help you decide who they think will be a good fit for your business. Additionally, a prospective franchisee may let their guard down around an established franchisee, compared to how they act in front of you and the recruitment team. In this sense, you can also better understand how your prospective franchisee could work within the franchise network.

5. Insufficient Capital 

You should note that some costs come with advertising a franchise opportunity and recruiting franchisees. As a franchisor, you need sufficient infrastructure to continue supporting new franchisees as they establish themselves within the franchise network.

In addition, there are considerable fees associated with:

• drafting legal documents and operations manuals;
• investing in training franchisees; and
• marketing materials to aid your business expansion.

There are several ways you can recoup these initial expenses through franchisee fees, although you will still need some capital to initiate the franchising process. Ultimately, you must establish everything before the first franchisee signs the agreement and pays the franchise fee.

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Key Takeaways

Finding the right person to operate a franchise business can be difficult. However, you can avoid hiring the wrong person for your company by:

• taking time to advertise the franchise opportunity;
• not screening-out potential applicants too early in the process;
• putting a sufficient selection process in place;
• involving your current franchisees in the selection process; and
• ensuring you have sufficient capital to select and continue to support your franchisee.

If you have questions about recruiting a franchisee, LegalVision provides ongoing legal support for all businesses through our fixed-fee legal membership. Our experienced franchising lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee.  To learn more about LegalVision’s legal membership, call 1300 544 755 or visit our membership page.

Frequently Asked Questions