SPECIAL REPORT
FRANCHISING
FINDING THE RIGHT FRANCHISE
PARTNER Finding the right match in any business relationship — franchise or not — is related to chemistry, compatibility and, most importantly, trust. Daniel During, principal and managing director at Thomas Klein International, lifts the lid on how to pick the perfect franchise partner.
Whether you are searching for a jointventure partner, an investor or a franchisee, it is important to make sure that before anything else, you get along. I believe that if the chemistry and understanding are there, all business issues can be resolved. My father always used to say: “If you don’t trust a handshake, don’t sign a contract,” and I still believe this wholeheartedly.
Following good business chemistry, the second most important element in any business relationship is the goodwill of your potential franchisee. They may not always have the necessary knowledge to operate a franchise, but if there is willingness to learn, this may work in your favor compared to partnering with someone who has the knowledge but is not willing to implement it.
Contracts and formal agreements serve a primary purpose of clarifying doubts; should things go wrong or turn nasty later on, you have something to fall back on. You do not really look at the contract on a day-to-day basis during business relations with your partner, and I have found that often both parties go well beyond the points stipulated in the contract. You may do things for the other party that are outside the contractual norm just for the sake of maintaining the relationship; you do so willingly because of the good relationship you have with them.
Having considered the points above, you need to assess who is “technically” the best business partner to be your franchisee. Ideally, you would like them to have a proven track record in operating similar F&B concepts as, for example, operating fast-food outlets is nothing like operating a premium or casual dining restaurant. Not only are the requirements and the skills set to operate these types of outlets different but the caliber of staff you place in the front of house to deal with guests is also considerably different.
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In addition to the professional abilities of your partner, you should also look at their financial capabilities. It is crucial for you to compare your business expansion plan against whether or not your potential franchisee has the financial prowess to grant such milestones. If the franchisee does not have the finances available immediately, you will need to define if, when and how they can acquire the necessary funds to grant such an expansion. At this stage, the following crucial questions need to be addressed: do I want to work with a franchise partner who doesn’t have the funds available immediately? Will the franchisee be able to obtain the required finance externally? A word of warning — be very careful when choosing a business partner who does not have cash available to finance future expansion plans and relies on a future loan, as that could involve paying high interest
