In the franchising industry, the success of an entire franchise rests on the backs of its individual franchisees. While many are drawn to franchising because it’s lucrative, only a fraction of those interested have the skills to assume the necessary responsibility.
For example, Chick-fil-A, the number one fast-food franchise for customer satisfaction, uses a rigorous vetting process to assess its candidates. In fact, its franchisee acceptance rate is 30 times lower than Harvard’s at 0.15%.
It pays to be choosy for Chick-fil-A. As a result of their robust due diligence process, Chick-fil-A’s franchise failure rate is significantly lower than the average at just 5%.
In other words, thorough vetting and stringent standards translate to stronger franchisee success rates and franchise synergy.
Barriers to Accessing Public Records The Importance of Vetting Franchisees
Independent franchisees’ role is two-pronged: Operate independently while adhering to brand consistency and quality standards.
How well they navigate that balance is critical to a franchisee’s performance and a franchise’s future projections. When the fit is right, a franchisee’s qualities, skills, and expertise cultivate synergy within a franchise, adding value.
When done poorly, misfitting can cause serious damage to a brand, company, and franchise. Studies show that misfitting is one of the most common predictors of franchisee failure, which occurs approximately 35% of the time. Likewise, heterogeny between franchisee and franchise moderates customer experience and satisfaction.
It boils down to trust. An unprepared or poorly fit franchisee who cannot properly adhere to franchise standards for customer service and quality will surely lose customers. As a result, those customers lose trust in the brand more broadly. Customers who encounter a poor experience at a specific location are much less likely to try another in the future.
From all perspectives, including customer experience, product or service quality, branding, marketing, and promotion, selecting the right franchisee ensures a business’s long-term viability and, thus, its success and longevity. According to Forbes, selecting qualified franchisees is a franchisor’s single most important operating problem.
For these reasons, adequate preparation is necessary to prevent losses. In this context, a franchisor’s goal is threefold: Mitigate the potential reputational, regulatory, and legal risk posed by a franchisee to a franchise. Thus, thorough vetting and due diligence are indispensable steps for prospective franchisees.
What is Franchisee Screening & Vetting?
Franchise vendor screening and vetting assesses a potential franchisee’s qualifications, financial stability, and compatibility. This process involves a series of steps including background checks, financial audits, and interviews to ensure the candidates meet the franchise’s standards and values.
Vetting ensures that only qualified, motivated, and enthusiastic potential candidates are granted the opportunity to operate under the franchise’s brand.
Vetting Franchisees Step-by-Step
Following referrals, tradeshows, and other initial meetings, franchisors must observe all of the following steps to ensure a potential franchisee’s fit within their organization:
- Discovery process. Most franchisors use a discovery process to screen and find potential franchisees. During this process, the prospective franchisee attends webinars, in-person and virtual tours, interviews, and reviews the franchise disclosure document (FDD). This extensive process filters poorly fit candidates.
- Application Review. The franchisor assesses the candidate’s business experience, financial capabilities, and motivation. Ultimately, candidates are screened through interviews to find a subjective measure of those who appreciate, understand, and align with the brand. Interviewers may determine whether a candidate’s experience, belief in customer-centricity, and quality standards align with the brand’s greater mission.
- Background check. A background check is a franchisor’s key vetting tool. It’s an objective measure to determine how and if a prospective franchisee will contribute and add value to the franchise. Furthermore, background checks are designed to mitigate reputational, regulatory, and legal risks posed to an organization by its franchisor.
Key Franchisee Qualities
As Forbes states, properly selecting franchisees is “the cornerstone and foundation upon which your brand’s expansion will rest.” To that end, it’s not just about expanding horizontally but extending the franchises’ mission and customer-centricity. Franchisees should possess values that align with brand standards and remain committed to upholding them throughout their tenure.
Franchisees should:
- Align with and move forward the brand’s standards
- Have a track record of proven operational excellence and business acumen
- Adhere to quality standards enthusiastically
- Contribute to brand growth through innovation
- Be financially responsible
Franchisees should not:
- Interfere with consumer trust, whether it be through ongoing litigation, trouble with the law, or a poor understanding of organizational standards
- Detract from the brand’s overall message and procedures, including operational, supply chain, or through marketing
- Forego organization quality standards
Selecting the Right Background Check
By selecting the right franchisees, franchisors can ensure a mutually beneficial relationship, fostering growth and success across their network. The right background check vets a potential franchisee’s ability to add value to an organization while mitigating the three risks they might potentially pose to a larger franchise.
Vcheck’s franchisee background checks are designed to analyze reputational risk specifically and objectively, eliminating potential bias from the selection process. Our comprehensive products target risks to the franchise/franchisee relationship and focus on identifying red flags that can sour it.
Contact us now to learn more about how our background checks build trust and longevity for franchises.
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