4 Reasons You May Not Qualify For a Franchise Good franchise companies are looking for a mutual fit when talking with prospective franchisees. Here's what might be stopping you from qualifying.
By David Busker Edited by Kara McIntyre
Opinions expressed by Entrepreneur contributors are their own.
Not everyone can or should become a franchise owner. It may seem like franchisors are overly aggressive in trying to sell franchises to new owners; however, a good franchise company is not looking to award a franchise to any random candidate who can afford the franchise fee.
Like any good business, a good franchise company knows it can only succeed with great people in the system. And every franchise system has a preferred profile for who will make a strong franchisee — typically based on analyzing successful prior franchisees and creating an ideal avatar for success.
The value of any good franchise system is a strong, consistent brand. A franchisor looks for franchisees who are a great fit for the services they offer and can provide consistency through business skills and acumen. For example, some franchises require more emphasis on sales leadership, while others succeed more through the execution and delivery of the service through team members.
As you proceed with the franchise investigation process, you should expect that a franchisor will have as many questions about you as you do about them. It is true that many franchisors desire to grow quickly — after all, many of them are new emerging companies also. Growing units more quickly allows them to invest in the infrastructure, assets and personnel to support a strong franchise network. But a good brand will be very careful to only award franchises to candidates who pass stringent criteria and they expect to be the best representation of the brand.
I always tell my candidates to treat the investigation process like a job interview. Once you get the offer, you have choices, but you need to put your best foot forward to get awarded a franchise. These companies are not selling used cars. Because they have to talk to sometimes dozens or even hundreds of candidates to sign a qualified franchisee, it may feel like you're going through a slick sales process — and you are, for efficiency's sake. But it is still selective. I have had multiple candidates rejected at Discovery Day when they don't present well after meeting the founders and management team.
Here are some common reasons you might not qualify or get awarded a franchise.
Related: 7 Things You Need to Know Before Becoming a Franchise Owner
1. Lack of capital
Every franchise has a minimum liquidity and net worth requirement. There are many avenues to finance your business, and franchise companies will often put in place special financing programs — especially if they have unique equipment needs, fleet vehicles, etc. But at the same time, the franchisor wants to confirm you have adequate reserves for working capital, achieving positive cash flow and covering your living expenses while you ramp up. If you are undercapitalized, they want to avoid setting you up for failure.
2. Lack of business acumen
Harvard Business Review researchers found that the average age of entrepreneurs at the time of their company's founding is 42. Franchisees likely skew even a little older, with many coming from corporate management backgrounds. As a franchisee, you don't need industry experience, but you should have a strong foundation of leadership and management experience. Knowing you can lead a team, work with others and be a good partner are traits every good franchisor wants to see in a candidate.
3. Lack of availability
Many franchises have full-time requirements, which is not usually a problem if that matches the candidate's needs. But I've had many franchise candidates who want to keep their corporate jobs and start a franchise on the side. There are a large and growing number of franchise companies that allow that and are structured to be run by a manager. However, there is no such thing as a truly passive franchise. If you are looking only for investment and have no interest in running a business, you won't be a strong candidate for a franchise. Even for semi-absentee models, you need to have enough flexibility to be available to your general manager and handle the occasional business issue during regular work hours.
Related: Go Beyond the Interview: How to Get a True Feel for a Franchise
4. Poor attitude
I've never told a franchise candidate that starting a business is easy. It's not. So, it's even more important that candidates have an abundance mindset and the mental fortitude to overcome obstacles. If a franchise candidate is negative and pessimistic before even getting started, how are they going to hold up emotionally when the inevitable challenges come up when starting a business? A franchisor wants to see a true entrepreneurial spirit in candidates before awarding them a franchise.
If you investigate a franchise company that is simply looking to add franchisees without any standards or qualifications, watch out for that brand. It's not common, but like anything else, there are good franchise companies and bad franchise companies. If you have a hard time filtering all of the brands out there, you may want to engage a franchise consultant to help you focus on strong brands that will be invested in a long-term partnership to help you achieve your goals.
Nearly every franchisor wants to grow and add more franchisees. But the good brands are focused only on adding highly qualified and value-added franchisees. Having the right mindset as you go into the process will help you avoid seeing it as a one-way street. Yes, they are selling you the franchise opportunity, but you also need to sell yourself as a valuable and productive partner in their system. Make sure your capital, skills, time and attitude all line up with the prospective franchise system and put your best foot forward to be awarded a franchise.
