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8 requirements you must look for in a franchisee

Here\\\'s a checklist to guide you before you sign anything
By Carlo P. Mallo |

With the number of franchise opportunities out in the market today, aspiring entrepreneurs are overwhelmed with the choices at hand – there is just too much to choose from. Thus, the agonizing scrutiny of franchise contracts, financial statements, franchise support and the like.

However, it is not only aspiring franchisees who are doing the screening process. The franchising company is also doing its own scrutiny of aspiring franchisees, as it is their brand which is on the line. With the average franchise agreement term playing between 5 to 15 years, a franchise agreement is not a joke.

Ask Teresita L. Ngan Tian, founder of Lots’A Pizza, about finding the right franchise partner and she’ll say it is something “easier said than done.” With 142 outlets in Luzon and Cebu, Ngan Tian definitely knows what she’s talking about.

“The success of any franchise business also depends on the performance of the franchisee acquiring it. Thus from the beginning, the franchise applicant must make the fit, and careful evaluation must be done by the franchisor in order to ensure that the franchisee is truly compatible with the franchisor’s philosophies and standards,” Ngan Tian said.

At Lots’A Pizza, eight tools have been created and designed in order to distinguish the compatible franchisees from the rest of the applicants.

1. Application letter. Initial documents like letters of intent and franchise application forms submitted by the franchise applicant are pre-qualification tools.  

2.Physical exam.  Potential franchisees are rated according to physical health, age, number of dependents, income status, accessibility to his chosen location, business experience, personal involvement in the business, educational attainment, and other businesses.

3. Background check. A thorough background and credit investigation is also conducted by a third-party agent to ensure that the applicant is of good moral fiber and possesses excellent financial standing with a good history of paying habits.

4. Screening proper. Franchise applicants undergo a series of meeting sessions upon applying for a Lots’A Pizza franchise--preliminary meeting, franchise orientation, panel interview, executive meeting with the chairman and president (a very critical meeting), and finally, franchise training. These meetings are designed so that we could unearth little by little the applicant’s true character—a franchise applicant could conceal his true personality or attitudes due to his eagerness to acquire the franchise.

5. E.Q. Psychological and intellectual assessments are also done through a so-called franchise applicant suitability test (FAST) in order to evaluate the franchisor-franchisee compatibility. There are no right and wrong answers in this test—a franchisee’s success depends on having the right match between the franchisee’s personality and attitudes with the franchisor’s philosophy and way of running the business.

6. Contract comprehension. A franchise agreement comprehension test is also undertaken--this helps us assess whether the potential franchisee fully understands the franchise agreement of Lots’A Pizza. A franchise agreement reviewer module is provided a week before taking the test in order for the applicant to have time to study the agreement carefully and to consult a lawyer if necessary.

7. Monitor and feedback mechanisms. Monitoring behavior and performance for both franchisor and franchisee must be of high priority. Because of the need to make sure that the franchisor and franchisee meet each other’s expectations, they sometimes miss achieving optimal levels of performance. In order to keep on improving, there must be monitoring, control and feedback mechanisms in place.

8. Flexibility. Remember that in the process of operating the business, both the franchisor and franchisee can--and should--refine the physical and operational aspects of the franchise system created by the franchisor. With tangible and intangible assets working in unison, you can greatly increase the chances of success for your franchise.


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