Franchise Buying Guide

The Right Stuff

Are you franchisee material? Take a look at yourself from a franchisor's point of view, and see how you measure up.
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Guidant Financial specializes in helping entrepreneurs purchase new franchises using their retirement funds.

If you've reached the decision to buy a franchise, it's almost like settling down with that special someone. After reviewing the multitude of franchising options available, you've singled one out. Now, let the courtship begin...with the franchisor.

In traditional courtships, meeting the parents to obtain their blessings is proper etiquette. For franchisors, it's mandatory, but they, just like parents, want to get to know all about you. Good franchise companies can't and won't simply hand over the keys to your business upon deposit of your franchise fee-they have to consider many factors first. During this "investigation process," the honeymoon may seem as if it's over before it ever began, and you may become annoyed with the barrage of questions. But upholding standards for their franchisees not only ensures that quality and excellence are associated with their image, but also with yours, if you join their "family."

Do Franchisors Want Entrepreneurial Franchisees?

Emerging successfully from your franchisor evaluation requires understanding what they're looking for and proving you've got those qualities. While running your own franchise is like being an entrepreneur in regard to working for yourself, Jeff Elgin, founder and CEO of franchise referral consulting firm FranChoice, in Eden Prairie, Minnesota, believes most franchisors seek system-focused people rather than true entrepreneurs. "[Franchisors] have spent years building the company," says Elgin. "They don't want someone who will come in and try to innovate, because that produces chaos."

Choosing a franchisee who's too entrepreneurial can lead to problems, agrees John Campbell, vice president of franchising for Papa John's International. But the other extreme he sees is selecting a candidate who's unable to follow a system, though they really try. "In either case, we have all made bad choices in our quest to help them become successful businesspeople," Campbell says.

"You want someone who has enough entrepreneurial spirit to be on their own," says Rob Sanders, director of market expansion for Merry Maids. But with a franchise, he adds, "you don't have to reinvent the wheel." Ultimately, according to Sanders, they look for a good balance between the entrepreneurial and the system-focused person.

What They Look For

In terms of experience, many franchises, including both Papa John's and Merry Maids, prefer management backgrounds. Elgin finds that franchisors typically don't seek out candidates with specific skills related to the industry, but there are exceptions. Conversion franchises, such as hotels and real estate franchises, seek experienced people who are knowledgeable in the field. Papa John's also prefers candidates with a food-service background and operations qualifications. But it's not a deal breaker if you don't have these traits-in some instances, Papa John's will advise you to either first gain experience as an employee or to go into a partnership.

While every franchise has its own standards, both attitude and personality are universal factors franchisors consider. Says Elgin, "Sometimes you get people who are wishy-washy. Those people are scary to a franchisor." Those who have a firm sense of what they want to achieve are far more likely to impress franchisors. Franchisors also judge what type of personality you have and how that will translate into running one of their franchises.

Although personality ranks high, it's still not strong enough to stand alone without financial qualifications. Fortunately, some franchisors offer help. Papa John's has 10 companies that finance their franchisees, says Campbell, "depending on their creditworthiness and the number of stores that are to be built."

But many prospective franchisees don't know or understand marketplace financing, says Elgin. Some candidates believe they can easily borrow money to cover what they don't have. "Unless the franchisee has an existing business or personal assets, an overwhelming majority try to set up home equity," he explains. "But the minute you say you want it for a business, it becomes very difficult." Huge factors in looking like the right candidate are having capital resources and showing franchisors you've got your finances in order.

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This article was originally published in the September 2004 print edition of Entrepreneur with the headline: The Right Stuff.

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