Perhaps the single most important part of the franchise sale is the franchise application process. In particular, franchisors should integrate efficient and thorough vetting and due diligence steps within their application process to ensure the quality of prospects who apply for franchise ownership.
To help illustrate just how crucial this step is in the franchising industry, let’s discuss the benefits of a comprehensive vetting process for franchisors, as well as how it can be beneficial for the applicants, too.
Franchise Application Process for Franchisors
While getting the right candidates to invest in and become owners of your franchise is crucial for all brands, regardless of their size, it is especially critical for emerging brands to get this right.
While a large franchise system that has thousands of locations will be able to survive the occasional less-than-ideal Franchise Owner, emerging franchises must be extremely diligent in vetting prospects and choosing a qualified candidate that is a good fit for the brand and will bring value with the appropriate financial wherewithal. For emerging brands, it’s all about momentum. The more capable and committed Franchise Owners you can find early on who are willing to do what it takes to succeed, the more likely you are to continue to grow and scale and reach ten, fifty, one hundred units, and more.
Furthermore, closures in the early stages of a brand have an outsized impact. Future Franchise Owners and lenders will likely be aware of these closures, making them less likely to invest in the brand going forward because they may see it as a risk.
Financially Vetting Your Candidates
Prospects should be qualified for financial requirements before moving forward in the sales process. Just as you should be upfront about what is expected in terms of experience and skills, brands need to be transparent on the financial requirements of investing in their franchise. This ensures that there won’t be any issues down the road where the Franchise Owner runs out of money while addressing initial start-up costs.
Of course, in many instances, your applicants may require a franchise loan and additional franchise financing to get off the ground.
Financially vetting candidates can be cumbersome, especially when it comes to substantiation tasks like collecting bank and brokerage statements. By outsourcing that work to a company that has secure technology and processes to do so effectively, brands can save valuable time while improving the quality of their vetting.
Vetting and Verifying the Quality of Your Applicants
Copy: When brands let anyone and everyone get too far into the process, they are not only wasting their own time, but they are also wasting the applicant’s time.
As a crucial first step, franchisors should have a background check implemented very early on in their franchise application process to weed out those who are not good fits. This will give franchisors insight into their applicant’s liquidity, net worth, credit report, and any red flags that may come about through their criminal history.
For example, does the applicant meet the brand’s liquidity requirement? Too often, applicants don’t know their liquidity or include items that should be excluded.
The goal for franchise development sales is to grow the brand and expand. Equally, if not, more importantly, you should aim to sell as many units and territories as possible to qualified candidates. After all, you’re trying to grow a successful, respected brand. If your franchise ends up in the wrong hands, there are potential risks to your reputation, as well as possible legal issues down the road. Both of those can be detrimental to your franchise system.
At the end of the day, the relationship between the franchisor and Franchise Owner is a business partnership. When both parties look at it through that lens, the more likely they’ll make a good decision on whether or not to start a said partnership.
How BoeFly Helps Franchisors with Their Franchise Application Process
At BoeFly, we understand the importance of empowering brands to ensure they are investing time into the right prospective Franchise Owners. To help brands find the right partners to join their franchise family, we offer bVerify, our thorough verification tool.
With bVerify, we can efficiently verify candidates’ liquidity and net worth, as well as quickly handle credit and criminal background checks. With the ability to integrate into CRMs like FranConnect, franchisors can have complete visibility on the verification process.
Savvy franchise brands that understand how outsourcing the vetting and verification process can drive efficiency to choose BoeFly.
By partnering with BoeFly, franchise directors can spend more time finding qualified candidates and less time on tedious paperwork. To get started on integrating bVerify into your franchise application process, fill out this form, and one of our experts will be in touch.
Franchise Application Process for Prospective Franchisees
Just as franchisors should be doing their due diligence on their applicants, prospective Franchise Owners should be conducting their own financial due diligence on the franchises they are considering investing in. This is especially important if they are considering investing in an emerging franchise that doesn’t have quite as much success to their name as a more established brand.
Ask questions about their plans for growth, Franchisee support system, and how they are marketing themselves against competitors to find out if the franchise concept has a solid foundation. In addition, find out the franchise investment range to start exploring franchise financing options.
You should also pay attention to the application process they put you through. Is it extensive enough where they are not letting anyone and everyone join? You don’t want to become a Franchise Owner with a brand that sells to anyone who can write a check.
If you’re looking to invest in a franchise or are wondering how to qualify for a small business loan, check out our Franchise Financing Guide to learn more about the financing options available to you to help fund your investment.