This article by Tom Spadea was featured in the April 2021 issue of Franchise Dictionary Magazine.
I was asked by a franchisor client the other day what they should do if they had three good candidates for the same territory. What a great problem to have for sure, and in fact I wouldn’t even really define it as a problem. That aside, the heart of the question was whether there are any rules, laws or regulations around picking the person or group that you want to select as your next franchisee.
The franchisor wanted to know if they were obligated to award the deal to the first person that inquired, even though the others would clearly be better operators. The last two prospects had more capital and more sales experience, which for this franchisor is a leading indicator of franchisee success.
The good news is, this is one area in life where you are allowed to be selfish. You should make your decision based on what is in your long-term interest, which also happens to align with the best interests of both the candidates you accept, and those you reject.
That eliminates prospect number one, but what about between the other two? We try so hard in modern business life to boil everything down to metrics, numbers, and statistics. However, sometimes you just have to exercise your business judgment. That judgment, which evolves and matures over time, is one of the secrets to your success. As franchise lawyers, we get many calls from clients looking for the rule or the common practice to aid them in their decision-making. We like getting those calls because most of the time there is a rule that if violated could risk or even derail your growth trajectory. But sometimes there is not.
You of course have to stay within the bounds of anti-discrimination laws and common decency, but this was not the question my client asked. They wanted to know if the candidates had any claim on the area by inquiring first, by showing up for discovery day first, etc. They don’t. Just like you know it’s not a deal until the franchise agreement is signed and paid, the same rules apply to them. There is nothing more important for a franchisor than picking superstars. You are a recruiter, not a salesperson. Recruit the best franchisees you possibly can, and the rest will take care of itself. It’s your brand and it’s your decision.
To see all of Tom’s featured articles on The Franchise Dictionary Magazine, visit this page.