As a franchisor, you put your money, time and reputation on the line with each one of your franchisees. Award a franchise to the wrong person, and you could incur damage to your image and brand. And that, in turn, could jeopardize your other franchisees as well as your funding sources.

So what qualifications should you look for in potential franchisees? How do successful franchisors choose the right people?

Start with the following three basic factors for best results.

1. Look for Franchisees with Capital

Most successful franchisors establish minimum net worth and liquid capital requirements for potential franchisees. But having adequate financial capacity to cover fees and startup costs isn’t enough.

Your franchise business model likely recognizes how much time is required before a new franchise begins to turn a profit. Until that time, franchisees must be able to cover operating costs as well as their own living expenses.

Perform the appropriate due diligence to evaluate the financial situation of all prospective franchisees. Make sure that the applicant won’t be starting out the business in debt and that they won’t run short on capital while the new business is working toward becoming profitable.

2. Look for Franchisees with the Right Personality

Certain personality traits are a natural fit for the franchise industry.

Individuals with a strong work ethic who enjoy solving problems and working with others typically make for good franchisees. An entrepreneurial spirit is critical, but franchisees also must be able to follow rules. People who are rebels or lone wolves may not be a good choice, as they may prefer to do things their own way.

Motivation to succeed is another personality characteristic prized by franchisors.

Every applicant may seem eager, of course, but motivation often can be better judged by examining past work history. For example, someone who flew up the ladder in a corporate setting or has been successful in the past as an entrepreneur or franchisee may have the ambition and drive to make a new franchise successful.

3. Look for Franchisees with Business Skills

When selecting franchisees, experience may be less important than an applicant’s hard skills.

If your franchise system is like most, you provide training to maintain consistency across your brand and company. So the business skills that a potential franchisee brings to the table can help determine if you should award a franchise.

What types of skills are valuable to franchisors? Business acumen is a big one, as franchisees must appropriately deal with any business situation. A solid understanding of financial concepts and the ability to lead a team of employees are also desirable skills.

And it’s often advantageous to choose franchisees who are knowledgeable about the local community and the competition for the business.

Awarding a franchise requires careful consideration and evaluation of applicants if you are to maintain the quality and consistency of your brand. In Provo, Utah, the experienced attorneys of the Franchise & Business Law Group specialize in assisting franchisors with all facets of their business.

Contact us today for assistance with your business law and franchisor-related matters.