How franchisors vet franchise prospects

Franchise prospects aren’t the only people doing due diligence before a franchise sale is consummated. Good franchisors are also doing their due diligence by spending critically important time to vet their franchise prospects.

With 30 years of experience developing franchise brands, United Franchise Group (UFG), based in West Palm Beach, Fla., has a ton of experience vetting franchise prospects. The company includes eight brands with more than 1,400 franchisees in 80 countries.

Matching people to businesses

But even after that many years, and all those franchisees, CEO Ray Titus says his number one challenge is matching the right people to the right business. “Not every business is for every person,” explains Titus. And like every good franchisor, Titus wants to avoid failure, both for the franchisee and the franchisor.

Two reasons for failure

Through the years, Titus has learned that franchisees fail for two reasons: they’re under-capitalized, or they’re under-educated. He goes out of his way to make certain that neither condition exists for franchise prospects who are approved for UFG businesses.

So how does United Franchise Group vet franchise prospects?

The process begins at the introduction. Whether the franchisor meets a franchise prospect at a trade show, such as the International Franchise Expo, or via the telephone, the vetting begins.

Measuring interactions

Ultimately, a good franchise prospect arrives in West Palm Beach to attend a discovery day and tour the headquarters. During that time, the franchise prospect meets a half-dozen members of the franchisor’s team. Prospects also meet existing franchisees. And no introduction is by accident.

Each team member at franchise headquarters has a job to do. That job may involve explaining an aspect of the business to the franchise prospect, but it also includes interacting with the franchise prospect and looking for clues about the prospect’s compatibility with franchising at UFG. Team members are always asking, “Is this franchise prospect the right candidate for our business?”

Franchisees offer their opinions

Similarly, franchisees interact with franchise prospects, too, and they’re often the best judges of who makes a good fit for the business. They look for clues in the way prospects ask questions, and their levels of interest in various aspects of the business. Are prospects more interested in the end result than in what it takes to actually build a successful business?

Members of the UFG team may spend multiple days with a franchise prospect, and once all the introductions have been made, the business has been explained, and the tours end, then the UFG team goes to work. “Then we have a team meeting,” explains Titus, “and we go through each individual (to vet them).”

Only certain types need apply

UFG is looking for a specific type of franchise prospect, but one that’s not any different than the type most franchisors seek. A franchise prospect must be financially qualified, and UFG will closely examine the financial information that the prospect provided when applying for a specific UFG business. Similarly, UFG will look at past experiences and relationships to determine if a franchise prospect is a good fit.

With the preliminaries out of the way, UFG then looks at the franchise prospect’s level of motivation. Even before seeking a franchise opportunity, Titus encourages people to look at themselves and ask: “Am I motivated?”

Motivation matters

By that he means a franchise prospect should be ready to get up in the morning to run and operate a business following the franchisor’s systems and guidelines. Franchise prospects need to know if they’re interested in customer service, sales and marketing, and paying attention to the details relative to building a successful business.

Titus also wants to know why a franchise prospect is motivated. Is it for money? Or is it to change their quality of life? There are different motivators for different franchise prospects, and it’s important to know what a franchise prospect is aiming to achieve.

Franchisor longevity matters

Only a motivated franchise prospect should take the next step, which is to look at a specific business. That’s where UFG has an edge, or two. The company offers eight different franchise opportunities from a retail sign business to a home-based event planning business.

However, the company has something else that attracts franchise prospects: longevity. Titus points out the importance of finding a franchise company that has not only developed a brand, but has operated that brand with numerous franchisees for a long period of time.

Franchisor’s culture matters

And it’s not only years in service that should make a difference to a franchise prospect. Titus recommends that prospects look at the company’s culture. Don’t overlook the type of people you’ll be doing business with, he says. “Are they motivating and positive? Will you enjoy being in the business (with these individuals)?”

Vetting a franchise prospect may take no more than a few hours, but it may involve several days of analysis by the franchisor’s team. What’s important is that the vetting occurred. A franchise prospect should be leery of any franchisor that’s willing to award a franchise with minimal information, and with little time engaged with the prospect. That’s a good sign that the franchisor is more interested in collecting fees than in evaluating franchise prospects who can build successful businesses.

In this interview with Dr. John P. Hayes, Titus discusses various aspects of owning and operating a UFG brand. You’ll find additional information about UFG in the popular eBook: 12 Amazing Franchise Opportunities for 2015.

Would you prefer to listen to this interview as a podcast?

Categorised in: Franchise FAQ's, Franchisor

This post was written by Dr. John Hayes