How to select your first franchisees

Turning an existing business into a franchise means choosing people who can operate the model, not just those who can afford the investment. Your first franchisees help establish ways of working together that will shape future expansion. To build a strong franchise network, selection needs to combine objective criteria, realistic expectations and respect for the time candidates need to make a decision.

1. Turn day-to-day business requirements into selection criteria

Before advertising the opportunity, describe the work the franchisee will actually do. Will they need to oversee the opening of the outlet, recruit staff, sell, manage stock or find new customers? The answer should come from your existing operation, not an idealised image of an entrepreneur.

Divide the criteria into three groups:

• Essential: conditions without which the operation cannot function, such as availability to manage the outlet where the model requires a hands-on presence.
• Developable: skills that can be acquired through training, provided the candidate has a suitable foundation.
• Desirable: experience that makes it easier to adapt, but whose absence does not justify excluding a capable candidate.

Avoid requiring experience in the same sector simply for convenience. An experienced person may resist your standards, while someone without that background may learn quickly and manage a team well. Look for evidence of behaviour, not just job titles on a CV.

In Brazil, Law No. 13,966/2019, the Franchise Law, requires the Franchise Disclosure Document (known by its Portuguese acronym, COF) to describe the ideal franchisee profile, including previous experience, educational background and essential or preferred characteristics. It also requires disclosure of the requirements for direct involvement in operations and management. The criteria used in selection must therefore be consistent with what the offer states.

2. Create a short, documented process that allows fair comparison

Organise your selection process before enquiries start coming in. A predictable process reduces decisions based on personal rapport and prevents the urgency to expand from taking the place of proper assessment.

Start with a pre-qualification form covering the preferred region, availability, management experience, motivation and declared financial capacity. Then conduct a structured interview and a meeting to explore operational and financial matters in greater depth. Request supporting evidence only where it is necessary for the assessment.

Use the same core questions with every candidate. For example:

• Describe a situation in which you had to follow a procedure you disagreed with. How did you respond?
• How would you organise your day if the person responsible for the outlet was absent?
• What information would you review before cutting costs in response to falling sales?
• How would you resolve a conflict between following a standard and meeting a customer's request?

Record the answer and the evidence supporting your assessment. A simple assessment form can mark each criterion as met, awaiting evidence or not met. Decide in advance which outstanding issues will prevent a candidate from moving forward.

Candidate data also needs careful handling. Law No. 13,709/2018, Brazil's General Data Protection Law (LGPD), applies to the processing of personal data during selection. Explain the purpose of collection, restrict access and establish rules for retention and disposal. Avoid collecting documents and personal information that are not needed for the decision.

3. Assess financial capacity and operational fit

Having the funds to pay the initial fee is not the same as being able to fund the launch. Assess the candidate's ability to cover the total investment, working capital and personal expenses during the start-up period. Distinguish between available cash, illiquid assets and credit that is still subject to approval.

Ask who will invest and who will work in the business. Where there are business partners, speak to those responsible for management and understand how they will make decisions. An absent investor and an operator without decision-making authority can create difficulties even when the budget appears sufficient.

Present the day-to-day reality without glossing over the difficult parts. Explain working hours, controls, purchasing obligations, reporting requirements and limits on local adaptations. Do not promise profitability or present projections as guaranteed results.

An accompanied visit to the existing operation can help. Use it to discuss practical situations while protecting confidential information and customer data. Afterwards, ask the candidate to describe the challenges they observed and the support they think they would need. The aim is to check mutual understanding, not to generate enthusiasm at any cost.

4. Separate candidate approval from signing the franchise agreement

Internal approval should not create pressure to sign or pay immediately. The Franchise Law requires the COF to be provided in Portuguese, in a clear and accessible form, at least ten days before the signing of the agreement or preliminary agreement, or the payment of any fee by the candidate to the franchisor or to a person or company connected with it.

Keep proof of delivery and plan the timetable to respect this interval. Do not use a reservation fee to bring forward the financial commitment. Encourage independent legal and financial advice, and record the questions raised and explanations provided.

For the final decision, bring together the person responsible for expansion and whoever will provide operational support. If there is a fundamental mismatch, decline respectfully and give an objective reason. If information is missing, put the decision on hold rather than turning uncertainty into approval.

Putting it into practice: before advertising your first franchise, prepare an assessment form, a standard interview guide and a list of factors that would prevent a candidate from proceeding. Good selection means accepting only relationships that your operation can support and that the candidate genuinely understands.