Are Background Checks Enough in the Franchise Development Process?

Research prospects’ credit, driving histories, criminal backgrounds and even use personality profiling tools, but there are opportunities to learn much more.

By Kevin Drudge, CFE

The answer is not as simple as it may seem. With the tremendous amount of information now available on the web, franchise development is much different than it was 15, 10 or even five years ago. As a result of the information explosion, prospective franchisees are engaging us from a position of knowledge.

Even before the first meeting, having the proper information is mission-critical to attracting quality candidates to your brand. The information available for public consumption can be overwhelming depending on which strategies are used for development efforts: franchise specific websites, portals, social media, public relations, pay-per-click, webinars, blogs, virtual tradeshows and more.

Making sure you have the proper messaging and utilizing this information to the fullest extent possible is crucial to the success of your development efforts. As development professionals we must leverage this information or run the risk of falling behind.

No longer gatekeepers

Today, prospective franchisees have a wealth of information at their fingertips and are choosing to be much better informed earlier in the process regarding their options and are using it to determine when and if they will engage us. Franchise development personnel are no longer the gatekeepers of information. This role shift means they no longer control every part of the process nor are they the sole source of information for what prospective franchisees hear and see regarding our offerings. Proper messaging is essential and how it’s is conveyed across different sources and target audiences is increasingly critical. 

The franchise development landscape is highly competitive and becoming more so. This, coupled with the reality that strong franchise candidates are typically considering multiple options, means development staff must fight tooth and nail to bring them into their networks. Information, and its proper use, has rapidly become the determining factor in who wins. Bringing on the “perfect” new franchisee is the ultimate goal of every franchise.

But what is that perfect franchisee? People can look perfect on paper, interview like champions, carry themselves well or speak intelligently and make us think they are the best fit for our brands. But do we really know this person after 30 to 60 days of conversation or two chats a week and one face-to-face meeting?

You can run credit, driving history, criminal background checks and utilize personality profiling tools — all of which are important, but there are opportunities to learn so much more through the world we live in. Consider the length of your typical sales process. Recognizing that time kills all deals, most franchisors try to run the shortest timeframe possible while giving prospective buyers time to properly evaluate the opportunity. The financial burden is extremely high. Industry sources such as FRANData and Franchise Update Media Group estimate the average cost per deal between $10,000 and $25,000 or more, and this doesn’t include compensating the salesperson. The bottom line:  franchise development efforts are very expensive and also one of the most important elements of a successful franchise company.

What motivates prospects to make a change?

Prospective franchisees are learning everything they can about a brand as quickly as possible in order to make an informed decision. Given the readily available data, shouldn’t we be doing the same thing to get to know our prospects personally and professionally?

Many of our franchise prospects today try to connect with us on social media or at least look at our profiles, both personal and corporate, to investigate the development staff, executive team and our company during the process and beyond. I encourage all franchisors to accept most of these invitations as a means of getting to better know our prospective franchisees.

This may cause concern for some who prefer some level of personal privacy. On the other hand, we should consider the opportunity it creates to help better vet prospects and see what interests and drivers they have motivating them to make a major change. 

After all, the efforts each party goes through to properly conduct due diligence is expensive and time consuming, but well worth the effort. Think about the last time you made a major purchase, sought employment, or tried to volunteer for a school, church or youth sports league. Most of the time we are accustomed to being “checked out,” whether it is simply pulling our credit or driving records, or even criminal backgrounds and histories.

Adopt policies that address prospects’ emotional drivers

It has become a mainstream practice in our lives to protect ourselves, our families and everyone’s well-being. Don’t be afraid to utilize these traditional means of vetting prospective franchisees, but also incorporate these new sources of information at the same time.

We need to adopt policies and practices in our franchise development processes that allow us to portray ourselves and our companies in manners that address prospects’ emotional drivers while we engage and get to know them. Part of this effort involves not just being selective in who we administer these processes with, but doing it with every candidate at the appropriate time in the development process. Do it smartly, in a non-alarming way and don’t be afraid to research the people you plan to do business with over the next 10 to 20 years. After all, they are doing the same thing to every company they consider.

By not being responsible franchisors and fully vetting prospective franchisees, we run the risk of bringing in under-performing franchisees and setting our brands up for additional headaches down the road. We also run the risk of thinking we have a great new franchisee only to find out during the lending process that he is not able to access the necessary funding for the project. Now both parties have wasted time and money on someone who shouldn’t have been awarded a franchise in the first place.

Set your brand up for success

As we evolve and adapt our franchise development processes we should keep in mind certain types of franchise companies draw more scrutiny from customers, lenders or suppliers. With readily available information, partners and customers can quickly and easily find out about our franchisees — meaning one “bad apple” can really impact your growth and development, both short and long term.

Technology and information are reshaping our franchise development efforts.  Properly using it to identify and vet the right prospects will set our franchise brands up for success. No longer are the old staples like credit pulls or background checks sufficient. It’s not a question of should we incorporate all of these new sources of information, it’s a matter of how and when and in what manner that makes sense given our development process and franchise offering. To arrive at the “perfect” new franchisee we must gather as much relevant information and incorporate these practices into our marketing and development processes routinely.

Kevin Drudge, CFE, is Chief Development Officer at AdvantaClean. Find him at fransocial.franchise.org.