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What’s the Best Way to Predict Franchisee Performance?
We all know that success in franchising is largely about selecting the ‘right’ franchisees. Arguably, franchisee selection is the most important decision a franchisor can make. So how do franchisors go about the selection process and what selection tools are on offer?
Inadequate franchisee selection procedures are the biggest single cause of franchisee failure, according to a study by Professor Lorelle Frazer from Griffith University.
Inadequate franchisee selection is also a factor in franchisee performance, which has a direct impact on franchisor revenue and profitability. I have found over my years as a franchise manager, franchise owner and franchise consultant that franchisee performance can be measured in what’s known as a Bell Curve*. Typically there is the top 20%, the bottom 20% and the 60% in the middle. Every sport, every school, every business and every franchise has people who perform along the Bell Curve, according to the theory.
Because another performance model, the Pareto Principle (also known as the 80/20 rule)* says that roughly 80% of a franchisors' royalty income may come from 20% of franchisees, there is a clear incentive for franchisors to shift the Bell Curve to the right, thereby increasing overall franchisee performance and consequently franchisor income.
But if the franchisee selection process is so important to franchisee performance, why do so many franchise systems have inadequate processes?
Of course, for the handful of unscrupulous franchisors who make money through franchisee churn, the attitude is “Who cares?” “Do you have the money to pay the franchise fee?” is the only selection question they need to ask.
Similarly, I have found that new franchisors often take on virtually anybody who wants to buy a franchise, not only because they need the money and to start building some critical mass in their franchise network, but also because in the early days they may not understand what it takes to be a high-performing franchisee.
But if you’re in it for the long haul, you’d better believe that the quality and value of your franchise’s business model, branding, systems and support count for nothing if you don’t have the right people on the ground.
What do the right people look like?
That depends on the franchise business, according to Christiane Gaul of the University of Applied Sciences in Kufstein, Austria, in her study Partner Selection Process in Franchising. Of course, the kind of candidates a franchisor looks for will be different for a lawn-mowing franchise than a professional services franchise.
But selection criteria and processes are also influenced by the franchise company’s age, size, culture, growth ambitions and life cycle stage. For example, as I mentioned earlier, an aggressive startup franchise is much more likely to take risks in franchisee selection than a mature, established franchise, a decision that often ends in a lot of unnecessary franchisee churn or, at worst, disaster.
This is just the first part in our series on Franchisee Selection: Why It Is the Most Important Decision Franchisors Make
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As a franchise consultant, I’ve had the privilege of working with brands that are reshaping industries and challenging the status quo. From the adoption of groundbreaking technologies to the reinvention of traditional franchise agreements, the past year has been a proving ground for innovation. As we step into 2025, the question isn’t just about keeping up—it’s about leading the charge. Let’s explore what the future holds and how some of the most innovative franchises are already paving the path to success.
New laws and regulations came into force in 2024 which will affect the franchising industry, both directly and indirectly, and may lead, in the words of McDonald's corporate and franchisees, to "destruction of the franchise business model"
$8 billion. That's the jaw-dropping amount that Blackstone private equity just paid for Jersey Mike's, a submarine sandwich franchise with just 3,500 stores.
Jaguar's recent rebranding announcement has stirred up fierce criticism and even ridicule. Critics say Jaguar has thrown its iconic brand heritage into the toilet and come up with a new brand image that distances it from its traditional market but seems to alienate new markets.
Meet Sarah. She’s the owner of a boutique business in Auckland specialising in handcrafted, eco-friendly candles. For years, Sarah’s website thrived, attracting customers searching for ‘sustainable candles in New Zealand.’ Her engaging blog posts on candle-making and sustainability consistently ranked high on Google, driving steady traffic and sales. But recently, everything changed.
If you’re not up with the latest on 102-year-old brand remakes, then you’ll never guess whose rebranding pre-launch teaser this is part of. The whole video clip may help.
Donald Trump hasn’t yet taken his place as the 47th president of the United States, but he is already starting to make his mark again on world politics and economies.
This guy has, in my opinion, revolutionised the franchise industry with his unique approach to strategic franchisee recruitment and responsible franchising practices. Just last year, Aaron Harper, CEO and Owner of the Rolling Suds Franchise, awarded franchises for 59 territories across 16 US states, transforming the business into one of the world's largest power washing franchises. Here's how he's done it. Educational Videos: Harper shares real-time business strategies through educational videos on social media, offering insights into responsible franchising and business growth. Social Media Engagement: He maintains an active presence on platforms like LinkedIn and Twitter, posting daily content that discusses franchising best practices and industry trends. Podcast Appearances: Harper regularly participates in podcasts, sharing his journey and expertise in franchising, thereby reaching a broader audience. Keynote Speaking Engagements: He delivers keynote speeches at industry events, discussing topics such as responsible franchising and business development. Media Features: Harper has been profiled in top-tier media outlets like Entrepreneur, Authority Magazine and Franchise Dictionary Magazine, enhancing Rolling Suds' visibility. YouTube Content: He creates informative videos, such as explaining the franchise sales process to educate potential franchisees. Sometimes he seems to give away his 'trade secrets', which could easily fall into the hands of his competitors or inspire would-be franchisees to start their own independent power washing businesses. But Harper believes that his powerful branding, comprehensive end-to-end operating systems and his strong team approach add more value to prospects than going it alone. Getting the help of seasoned professionals: Because Harper's background is in a different industry than property maintenance and he was unfamiliar with franchising before acquiring Rolling Suds, one of the reasons for his rapid success was to engage the services of professionals who assisted him in combining his own vision, values and skillsets with those needed to build and grow a thriving franchise organisation.
Picture this: A prospective franchisee, excited about the possibility of joining your franchise, opens your Franchise Disclosure Document (FDD) for the first time. But instead of finding an engaging, informative document that fuels their enthusiasm, they’re faced with a wall of dense, complex text—a 100-page monolith that feels more like a legal maze than an opportunity.
Every few years, surveys surface that claim to offer a snapshot of the franchising landscape in different parts of the world. These reports are often filled with glossy graphs and impressive numbers like the one below.
Team New Zealand's stunning victory in the 2024 America’s Cup has become a source of inspiration far beyond the world of yacht racing. The principles that led them to success on the water can serve as powerful lessons for businesses looking to excel in 2025. Here’s what we can learn from their win to help drive success in the competitive business landscape. 1. Innovation as a Game-Changer Team New Zealand is known for pushing the boundaries of yacht design, constantly innovating to gain a competitive edge. Their 2024 victory was fueled by their cutting-edge technology, particularly in aerodynamics and hydrofoil design. In business, innovation is equally critical. Companies that embrace new technologies, from AI to automation, stand to gain the upper hand by improving efficiency and creating value in ways their competitors can't. Lesson for business: Invest in research and development and stay ahead of industry trends. Whether you're a franchisor looking to enhance operational efficiency or a startup exploring new markets, leveraging innovation is crucial to staying competitive. 2. Adaptability in the Face of Challenges In the unpredictable world of sailing, adaptability is key. Team New Zealand faced shifting winds, currents and tough competition, yet they adjusted their strategy on the fly. Similarly, businesses in 2025 will need to stay agile, responding quickly to changes in the economic environment, consumer behavior, and emerging technologies. Lesson for business: Build an organisational culture that thrives on flexibility. Encourage teams to experiment, pivot when necessary, and be open to rethinking strategies to stay resilient in dynamic markets. 3. Teamwork and Leadership While technology and innovation are important, Team New Zealand’s success also came down to their strong leadership and cohesive teamwork. Every crew member had a specific role, but it was their ability to work seamlessly as a unit that truly set them apart. The leadership team created an environment where each member could thrive and contribute to the collective goal. Lesson for business: Foster a collaborative work environment where every employee understands their role in the bigger picture. Strong leadership, clear communication, and a shared vision can align your team and ensure everyone works toward common goals. 4. Precision and Execution Yacht racing at the America’s Cup is all about precision—split-second decisions, perfect maneuvers and flawless execution. Team New Zealand's ability to execute their strategy with laser focus enabled them to edge out their competitors. Similarly, in business, having a strategy is only half the battle—success comes down to how well you can execute that strategy. Lesson for business: Prioritise operational excellence. Whether it's improving supply chain management, enhancing customer service or optimising your franchise system, ensure that execution aligns with strategic objectives for long-term success. 5. Staying Calm Under Pressure The high-stakes environment of the America’s Cup puts immense pressure on teams to perform. Team New Zealand's composure during tense moments allowed them to make smart decisions when it mattered most. In business, the pressure of deadlines, competition, and market shifts can be equally overwhelming, and maintaining focus is essential to making the right choices under stress. Lesson for business: Cultivate a culture of resilience. Train your team to handle pressure calmly and methodically. This will not only improve decision-making but also keep morale high in challenging times. 6. Working with the Best to Sail into 2025 with Confidence Team New Zealand's win was its record-breaking third in the America's Cup. New Zealand is only a small and geographically isolated nation compared to all of the other competitors in the iconic race. To me, their victory was a testament to any nation's—or business's—ability, no matter how small, to draw on the best people in their fields into their team. The Team New Zealand team was made up not only of world-class designers, boat builders and sailors, but some of the best in their fields outside the realm of yacht racing. For example, one of the team's cyclors was Hamish Bond, who was not a champion cyclist as you might expect but an Olympic gold medalist in rowing. Just as Team New Zealand's innovative, adaptable, and team-driven approach led to their triumph in the 2024 America’s Cup, businesses can draw on these same principles to navigate the complexities of 2025. I have a passion—backed by expertise and experience—for helping businesses like yours with the strategic vision, systems, people and flawless execution to win the future. Contact me to get started with a free Initial Consultation .
As we approach 2025, the franchising industry stands at a crucial crossroads. Following years of economic uncertainty, shifting consumer behaviours and adaptation to post-pandemic realities, indicators suggest that 2025 could mark a significant turning point for the franchise sector.
