With most franchise systems, when you want to buy a franchise, you need to go through an application process. Franchisors use this process to gather as much information as possible about prospective franchisees, which they then use to weed out undesirable candidates. If you are thinking about buying a franchise, knowing what to expect can help the application process go more smoothly, and being prepared can increase your chances of submitting a successful application.
What Do Franchisors Look for in Franchise Candidates?
While some franchise systems have more-rigorous screening procedures than others, generally speaking, franchisors will rely on the following types of information when evaluating franchise candidates:
1. Education, Employment and Business Experience
Franchisors will typically ask for information about prospective franchisees’ education, employment history and prior business experience, if any. While franchisors often expect their franchisees to be first-time business owners, having a business background can make you a more-attractive candidate (in addition to potentially increasing your chances of success as a franchisee).
2. Background Check
Most franchisors will conduct criminal background checks as well. If you have a criminal record, it may be best to be up front about it with the franchisor and proactively address any concerns you have run into in previous situations.
3. Financial Documentation
Whether you will be financing your franchise yourself or relying on funding from a bank, family member or private investor, you can expect the franchisor to request plenty of documentation about your source(s) of capital. Inadequate capitalization is among the leading causes of early franchise failure, and franchisors do not like to disclose these failures in the Franchise Disclosure Documents (FDDs).
4. Citizenship or Immigration Status
If you are not a U.S. citizen, you will likely be asked to provide documentation of your immigration status. The franchisor may also review US. Treasury’s Office of Foreign Asset Control (OFAC) records to confirm that you are not subject to sanctions.
Finally, franchisors will typically want to know about prospective franchisees’ motivations for pursuing their selected franchise opportunity. Motivation is a major factor in franchisee success; and, while you may not lose a franchise if you say that you are solely driven by profit potential, many franchisors prefer franchisees who have a clear passion for the business they run.
Don’t Forget: You Need to Do Your Due Diligence, Too
While you are working to satisfy the franchisor’s application requirements, it is important not to forget that you need to do your own due diligence, too. Buying a franchise is a significant long-term investment, and it is important to make your buying decision with as much information as possible. Learn more about due diligence for prospective franchisees:
- 10 Key Considerations for Due Diligence in Purchasing a Franchise
- Convinced You’ve Found the Right Franchise? Ask These Questions Before You Sign
- How to Gather Information from New and Existing Franchisees During Your Due Diligence
- What Does It Take to Become a Successful Franchisee?
- What Makes a Good Franchisor?
Speak with an Experienced Franchise Attorney for Free
If you are thinking about buying a franchise, our firm offers a number of flat-fee franchise business review services for prospective franchisees. We can help you understand the terms of your FDD and franchise agreement, and we can help you avoid costly mistakes that could have drastic consequences for your franchise. To get started, contact us to schedule a free initial consultation – call (202) 293-3947 or get in touch online now.