We have, on more than one occasion in this column, referenced the need to exercise caution when awarding franchises. New franchisors, fresh from spending $100,000 or more to develop a franchise program, will soon find themselves put to the test when a less-than-ideal candidate comes calling.
But the success of your initial franchisees, perhaps more than any other factor, will have a huge impact on the success of your franchise program.
The Nature of the Beast
Let's start with a key assumption: No business is foolproof. Fools are simply too ingenious; they can find ways to destroy even the simplest business.
Put another way, no business system is so strong that it can survive franchisees that are stupid, undercapitalized and lazy. So if you sell franchises to these prospects, they will fail. Period.
Once they fail--and, in fact, while they're on the way down--they'll be listed in your Uniform Franchise Offering Circular, along with their address and phone number, and your next prospective franchisee will call them. Every book on buying a franchise and every expert in franchise sales will counsel them to call. And rightly so.
And what do you think the failing/failed franchisees will say?
"Mr. Franchisor was a great teacher, and the system is flawless. In fact, the only reason I failed is because I am stupid, undercapitalized and lazy..."
Of course not.
They'll say the business is much more difficult than it appears. Franchisees will talk about the long hours and how the franchisors (you) don't care. And by the time they get around to telling the prospect about how they lost their house, their wife and their 401(k), and how they now live in a cardboard box underneath the train station, one thing will certainly be true: You will never sell that franchise prospect.
Ironically, these marginal candidates will not only say the worst things about you, but will require the most work from you, will pay you the least amount of royalties and will be the franchisees named "most likely to sue you" in your annual yearbook.
If a marginal franchisee is your 25th franchisee, you probably can weather the storm. But if this franchisee is among your first 10, you have problems. And if this franchisee is your first, you may be so distracted that you never get your franchise program in line again. Moreover, your first franchisee will often set the tone for your entire franchise program.