Special Report #105
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ESSENTIAL CHARACTERISTICS OF SUCCESSFUL FRANCHISEES

Over the years many studies have been completed to determine the ideal franchise candidate. Franchisors and professional psychological profilers have spent large amounts of time and capital to increase their chances of gaining a successful franchisee. To understand how well a potential franchise candidate will do in a certain franchise system, the franchisor should consider the four essential characteristics of successful franchisees. The franchisor will be wise to develop grading systems to observe the franchise candidate during the qualification process on how well they follow the system of qualification. If they can follow the franchisor’s qualification system, they can probably follow the franchisor’s system. Here is what most successful franchisors look for in potential single-unit and some multi-unit franchise candidates before they will award the franchise:

1. People skills. The franchisee must have the ability and desire to deal well with people. If they treat their employees and customers with trust and respect they will probably treat the franchisor the same. If they treat their employees well the employees will usually treat the costumers well. Franchisees will need to enjoy spending time with people. Franchisees who do not enjoy a lot of human interaction tend to become stressed. This will often lead to rudeness to employees, customers and eventually to their family, which will tear down the business instead of building it up.

2. Follow the System. The franchisee must have the ability and desire to follow a proven system. After analyzing the franchise system, the franchisee must be able to enjoy the system and reaping the rewards of following the proven track record. If the potential franchisee can’t or won’t follow a system for success, the franchisee should consider starting their own business or buying a business. At the heart of the franchise system are the marketing strategies and systems. The marketing programs should be examined carefully to insure the potential franchisee feels comfortable with the system.

3. Good Attitude. Carefully consider the potential franchisee’s attitude. Are they asking a lot of questions about failure or do they ask more questions about the success of the franchise. They should be seeking to find out what makes the franchise successful rather than dwelling on what makes the franchise a failure. All franchisors that have many units and that have been around a few years have failures. Most of the time it is due to the failure of the franchisee to follow the system. The franchisee must be self-motivated to take action and follow the successes of others. They should have a good work ethic and not be afraid to roll up their sleeves and work side-by-side with their employees. A potential franchisee can consider the success rate of the franchise. If it is under 70 to 80%, it may not be worth the time to consider it. Franchising as a whole has a 90% plus success rate.

4. Proper capitalization. The franchisee must have the minimum amount of liquid capital and net worth available to meet the franchisor’s requirements. A good franchisor will not allow the potential franchisee to move forward without the proper initial capital. The franchisee must have good credit, not perfect, but decent credit. This is essential for qualifying for a loan if necessary. Good credit also has a direct correlation with how successful the franchisee will become.

Area development franchisees and master franchisees will need to have the four characteristics listed above and, in addition, a fifth characteristic listed as follows:

5. Extensive business experience. Real life success in real business is essential. Successful master franchisees or area development franchisees will take their experience and apply it to the franchise system to help other franchisees succeed. With a proven record of success of the potential franchisee, the franchisor can expect the success to continue on the franchise system.