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by Professor John Stanworth
Page 1: Introduction

The question of who will make a good franchisee is one which exercises the minds of all franchisors. The statements below, plucked from various franchise sales brochures and articles, quite clearly spell out the overriding importance of franchisee selection:

  • "Franchising is a partnership. A franchise's major asset, once established, is its franchisees."
  • "A model franchise company will recruit as franchisees people who are not only qualified financially, but also by ability, energy and enthusiasm to make the most of the opportunity available to them."
  • "Setting up a franchise is less difficult than managing it later on - you have to live with your earlier mistakes and a lot of those are people you pick when the urge for rapid growth takes over from all other considerations."

Picking Winners
Picking winners is not a simple task and the difficulties inherent in the situation tend to be compounded by a number of additional factors:

  • Most developing franchises have much in common with the typical small firm in that they have only a few key staff members undertaking a multitude of tasks. These may be very able and committed people but, usually, none of them is expert in the field of personnel selection and management, which is the relevant specialism here.
  • Some franchisors may feel that they can rely on 'instinctive' or 'gut' feelings to signal good or bad franchises prospects. Just as few people would admit to being a bad driver, so they feel it reflects badly upon them to admit to difficulties in selection personnel.
  • Very often people fall into the trap for looking for people exactly like themselves when what they may be best advised to do is look for people who complement rather than duplicate their own abilities and weaknesses.
  • Inasmuch as franchising is a team effort, one of the key front line teams is the franchisee husband/wife team. If this team is not operating effectively, then a source of potential strength can descend into a weakness.

Costs & Conversions
For businesses having 4 or more years experience of franchising, research has indicated that nearly 60% report an average recruitment cost in excess of £5,000 per franchisee (1994 prices).

This cost is a reflection of appreciable numbers of applicant rejections and most of the more professional franchise companies convert no more than 4% of initial enquiries for franchise prospectuses into sales. Even this is judged by some to be, if anything, on the high side with 2% being a better target figure. But why should this figure be so low?

One reason is that self-employment is a pipe-dream for quite a large army of people who like to indulge in 'half-way-house' experiences. They may subscribe to small business magazines, attend seminars, join business clubs and, in this way, get an arm's-length thrill of a 'share of the action'.

Some of these people may, eventually, take the plunge, should they lose their job, or come into money, etc. But, in the meantime, they are not serious prospects.

Another reason is that self-employment is a widely held desire in our society, albeit one that is often associated with very little knowledge of precisely what is involved. Grand notions abound of independence - 'doing your own thing', 'no one looking over your shoulder', 'being able to play a round of golf midweek when the course is empty'. Thus, the bait is strong enough to at least initially interest a great many people.

Finance is often thought to be no great problem by potential franchisees since, as they see it, the clearing banks exist to address precisely this problem. However, many prospects will never have raised bank loans before and the idea of having to offer security or collateral (their house perhaps) can often come as a shock to them.

Some psychologists have made an industry out of attempting to devise tests which will predict those likely to make a success of running their own small business and those who are unlikely to do so. Whilst success in the field of psychological profiling here has been very limited, it is perhaps worth mentioning a couple of the more hopeful approaches.

Probably the best known is that associated with Professor McClelland and his attempts to measure 'achievement-need', or 'the desire to do well for the sake of an inner feeling of personal accomplishment'. In the 1960s this was used in many countries for selection and training purposes but, after some initial claims of success, has come in for increasing criticism.

Another psychological test is the so-called 'locus of control', which is based upon the proposition here that potentially entrepreneurs will have a high 'locus of control' or, in other words, believe that they can control their own behaviour and that their behaviour determines what happens to them. Put simply, this amounts to a belief that they control their environment rather than the reverse. Again, there have been some successes claimed here but locus of control testing is still not widespread in the field of entrepreneurial selection. Also, knowing that many people who become self-employed have been 'pushed' by environmental circumstances, e.g., redundancy, a locus of control test would not appear very appropriate.

There appears to be a common misconception amongst franchisors that franchisees are very different animals from conventional independent small business people. However, research shows that around one-third of franchisees have previously been conventional small business people and around half of all potential franchisees attending franchise exhibitions have current or previous experience of conventional self-employment.

Looking Through the Eyes of Potential Franchisees
It is important to keep in focus the goals of potential franchisees. Their prime aim in life is not, and will never be, to make your firm 'the biggest in its market'. Potential franchisees will have their own goals and these will vary with their past experience.

For instance, we now know that people without any previous experience of self-employment have goals practically identical to most other people in their situation. Thus, their main goal is the search for independence and autonomy, achieved through structuring their own time and efforts rather than being directly supervised and controlled by others.

For potential franchisees with previous experience of self-employment, the lure of franchising as a proven business system takes prominence. Thus, goals such as 'security', 'access to a known tradename' and 'business backup' assume great importance.

Some Guidelines for the Franchisor
Some franchise companies may wish to explore the possible advantages of psychological profiling in depth. If so, they would be well advised to seek specialist help. Short of this, what do the lessons of research and management theory generally hold to assist the franchisor in improving franchisee selection methods?

In a nutshell, they offer 3 main messages for the franchisor:

  • First we know that people who have either first hand experience of self-employment themselves or, alternatively, come from a family which has such experience, are statistically more likely to take up franchises than people randomly drawn from the population. Thus, ensure that you are delving this question at an early stage.
  • Make use of standard personnel selection techniques to ensure that your interview and selection techniques are as scientific as possible and protect you against subjective or whimsical judgements. For instance, you should develop a proper franchisee role description outlining the purpose, functions, responsibilities, conditions and prospects linked to the role.
  • Then, you should have a proper franchisee specification which should outline the kind of person best suited to the role. This document should be based upon the answers to 2 questions: which attributes are essential in a franchisee and which are desirable.
  • In addition to the above, you should develop your own diagnostic questionnaire schedule, suited to your own franchise operation (see below).

Whilst it remains true that there is no single foolproof formula, or litmus paper test, that will guarantee a franchisor 100% success in selecting good franchisees, the more scientific the approach used, the better your choices should be, thus bringing long-term benefits for franchisors and the franchise network. The remainder of this article will concentrate upon assisting franchisors to develop their own diagnostic questionnaire schedule.

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Professor John Stanworth is the director of the International Franchise Research Centre and has been engaged in research into franchising since the mid-1970s. He also leads the Future of Work Research Group, based at the University of Westminster, which has a record of specialist research in Teleworking, Small Business Development and Human Resource Management. Studies have been undertaken for many clients, including The Department of Trade & Industry, The Department for Education and The Economic & Social Research Council.

International Franchise Research Centre
The International Franchise Research Centre (I.F.R.C.) is committed to improving the understanding of franchising. This is achieved by the publication of impartial research and by the encouragement of informed debate.

International Franchise Research Centre
University of Westminster
35 Marylebone Road
England NW1 5LS

Tel. +44 (0)20 7911 5000 Ext.3025
Fax. +44 (0)20 7911 5839


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