How Businesses in China Can Screen and Interview Prospective Franchisees Before Launching a Franchise Network

When expanding an existing business into a franchise network, choosing the first partners is particularly important. Focusing only on financial resources may attract investors who have no time to manage an outlet; focusing only on enthusiasm may overlook their ability to cope with commercial pressures. Before formally recruiting franchisees, businesses should establish a consistent screening process so that every acceptance has a clear basis and unsuitable applicants can withdraw early.

1. Distinguish legal requirements from the brand’s selection criteria

Article 7 of China’s Regulations on the Administration of Commercial Franchising requires franchisors to have a mature business model and the ability to provide ongoing operational guidance, technical support, business training and other services. These are obligations on the franchisor: recruiting “experienced franchisees” cannot replace them. Even an outstanding applicant cannot compensate for an unproven business model.

A brand’s own requirements for funding, management experience and time spent on site are partner selection criteria. They should not be presented as nationally prescribed legal qualifications for becoming a franchisee. Where specific operating licences are required, the conditions applicable to the proposed activities and operating entity should be checked separately.

Before screening begins, head office should define the type of partner it is looking for. Must investors run the business themselves, or may they appoint a manager? Will the brand accept applicants without relevant experience who are willing to undergo training? Which day-to-day decisions must franchisees make personally? The answers should draw on experience from company-owned outlets, rather than ad hoc judgements by recruitment staff.

Passing the screening process does not mean an applicant can sign a contract immediately. The Regulations require franchisors to provide the relevant information and contract text in writing at least 30 days before the contract is concluded. Interviews, site visits and an applicant’s verbal agreement cannot replace this obligation.

2. Use a standardised application form to check operational readiness

The application form should collect information relevant to running the business. Avoid treating family background or personal connections as shortcuts for judging business capability. Four groups of questions are useful:

• Funding arrangements: The proposed investment, categories of funding sources, loan repayment commitments and working capital available after opening.
• Time commitment: Current occupation, other business ventures, expected weekly involvement in outlet management and who will take charge when the applicant cannot be on site.
• Management experience: Whether the applicant has dealt with staff turnover, excess stock, customer complaints or operating losses, with examples of the specific actions taken.
• Expectations of the partnership: What the applicant expects head office to do, and whether they understand their own responsibility for recruitment, day-to-day operations and local marketing activity.

Rather than simply asking whether funds are sufficient, ask applicants to set out separate funding plans for fit-out and equipment, initial stock purchases, working capital and personal living expenses. The aim is not to recalculate the outlet’s projected returns, but to identify cases where the same money has been allocated to several purposes.

Where verification is necessary, explain why, collect only the documents needed and allow unrelated transaction details to be redacted. Restrict internal access to applicant information; it should not be freely forwarded in franchise recruitment chat groups. Mark information that cannot yet be substantiated as “pending verification”, rather than treating it as confirmed fact.

3. Use scenario-based interviews to assess suitability

Use a consistent set of interview questions and involve both franchise recruitment and operations staff. Recruitment staff should explore the applicant’s interest in the partnership, while operations staff assess whether they understand their day-to-day responsibilities. Willingness to pay immediately should not count in an applicant’s favour.

Use three scenarios drawn from company-owned outlets: how to organise a handover if a manager suddenly leaves; what to investigate first when trading falls below expectations; and how to handle a customer’s unreasonable demand for compensation. Ask whom the applicant would contact, which records they would consult and what action they would take. Do not settle for a general promise to “follow head office’s instructions”.

Then arrange an outlet visit with clear observation tasks so that the applicant can see routine work such as stocktaking, shift handovers and hygiene checks. The visit should not involve unpaid cover for staff, nor should it be treated as formal pre-opening training. Its purpose is to help both sides establish whether the applicant is comfortable with the actual pace and demands of the business.

Interview records should distinguish facts from assessments. For example, “currently manages three other outlets and has not yet appointed anyone to take charge of this venture” is more useful than “insufficient commitment”. Where gaps emerge, establish whether the applicant has a workable plan to address them, rather than rejecting them on the basis of an impression.

4. Set clear outcome categories and review exceptions

Screening outcomes can be classified as “proceed to the next stage”, “review once further information is provided” and “do not proceed at this stage”. These are internal administrative statuses. They neither promise financial returns nor constitute any form of official accreditation, and should not be promoted as such.

For each decision, record the supporting reasons, unresolved issues, person responsible and next steps. For example, an applicant may have clear funding arrangements but no confirmed person responsible for day-to-day operations. In that case, ask them to complete their staffing plan before arranging a further operations review. Take a cautious approach and pause the process where applicants conceal important information, insist on a guarantee against financial loss or explicitly reject essential quality standards.

If recruitment staff request an exception, it should be reviewed by a manager who is not directly accountable for securing that particular franchise agreement. Record the reasons for the exception and the measures to manage the risks. Higher fees must not substitute for assessing operational suitability, and adverse records should not be deleted to meet signing targets.

After contracts are signed, compare screening records with actual operating performance. Which interview answers proved useful? Which questions consistently failed to distinguish how well prepared applicants were? Use the findings to improve the next round of screening, but do not retrospectively blame franchisees for inadequate support from head office.

Practical takeaway: Start with one application form, one scenario-based interview guide and one review record template. Applying the same standards to assess whether applicants have the capability, time and understanding of their operational responsibilities will do more for lasting partnerships across the franchise network than simply comparing who can pay fastest.