How to Choose Your First Franchisee

Your first franchisee is not simply someone buying your franchise package, but an independent entrepreneur with whom you begin building a franchise network. A poor choice can turn the launch into a constant exercise in resolving disputes. As the owner of an established business, you therefore need to decide in advance whom you are prepared to accept as a partner, what information to verify and when to walk away from a deal.

1. Define the right partner for your business model

Start with a one-page candidate profile, not a franchise advert. It should reflect the actual requirements of your model rather than vague qualities such as an ‘entrepreneurial streak’. If your own outlet relies on the owner's daily involvement, looking solely for a passive investor is risky.

Set out the essential requirements:

• The owner's role: personally manages the outlet or appoints a manager while remaining accountable for performance.
• Management experience: can recruit staff, control costs and handle customer complaints.
• Financial resources: can fund the launch and keep the business running if revenue falls short of expectations.
• Local knowledge: understands local demand, lease terms and staff availability.
• Attitude to standards: is willing to follow mandatory processes and seek approval for changes.

Separate essential criteria from desirable ones. For example, experience of managing people may be essential, whereas familiarity with a particular accounting software package can be gained through training. For each essential criterion, specify how you will verify it: through a document, a real-life example or a practical task.

Also set out what you will provide. You cannot expect a new partner to find premises independently if your offer promises support at that stage. The candidate profile and the level of support must align.

2. Organise your search without chasing enquiry numbers

For your initial recruitment, choose channels where you are likely to find entrepreneurs with the right profile: business associations, industry events, supplier referrals and your business's existing audience. Familiarity with the brand is useful, but a loyal customer does not automatically make a suitable operator.

In your advert, explain the owner's expected involvement, the geographical area you are targeting, what the start-up costs cover and the main selection stages. Do not promise guaranteed profits or replace clear requirements with emotional appeals to ‘secure your territory before it is too late’. The purpose of the first contact is to help unsuitable candidates opt out before lengthy negotiations begin.

Use the same process for everyone: a short questionnaire, an introductory conversation, a resource check, a working meeting and a final decision. Assign responsibility for each stage. A member of staff with an interest in making the sale should not have sole authority to approve a candidate: involve someone who will support the partner after opening.

Keep a decision log. Record not only the outcome but also the reason: ‘no manager in place and no personal involvement planned’ is more useful than ‘not keen on them’. This helps you assess candidates consistently and refine your search.

3. Check resources and business reliability

Look beyond whether the candidate has enough money for the initial fee. Ask them to prepare their own start-up budget covering premises, fit-out, equipment, stock, staffing and working capital. They should also show how each element will be funded and what obligations any borrowing would create.

Consider an adverse scenario: the opening is delayed, costs rise and revenue takes longer to reach its target. Ask which payments the partner could continue to make without taking out further loans. Do not set a universal cash reserve requirement: the amount needed depends on the business model and the circumstances of the launch.

Verify facts through lawful means:

• check company or individual entrepreneur details against Russia's Unified State Register of Legal Entities (EGRUL) or Unified State Register of Individual Entrepreneurs (EGRIP);
• verify the signatory's authority using the organisation's documents and a power of attorney, where required;
• check litigation, bankruptcy and enforcement proceedings through the relevant official sources;
• verify management experience through specific examples and reference checks agreed with the candidate.

The existence of a dispute does not, in itself, indicate unreliability. What matters is the context, the scale of the obligations and the candidate's explanation. Any discrepancies between the questionnaire and verifiable facts need to be discussed separately.

Questionnaires and supporting documents may contain personal data. Comply with Russia's Federal Law No. 152-FZ ‘On Personal Data’: define the purpose and legal basis for processing, restrict access and set retention periods. If you rely on consent, obtain it in the required form. Do not collect documents ‘just in case’.

4. Hold a working meeting, not a loyalty test

Give the candidate a realistic task that does not require access to trade secrets. For example, ask them to compare two hypothetical premises or draw up an action plan for a staffing shortage before opening. Assess their reasoning: do they clarify the information provided, identify constraints and distinguish assumptions from facts?

Discuss a scenario involving a departure from your standards. What would the partner do if a local supplier offered a cheaper substitute for a mandatory ingredient or material? A strong candidate will not necessarily agree with you immediately, but should understand the approval process and the consequences of making an unauthorised substitution.

Use a standard assessment sheet with the categories ‘confirmed’, ‘needs clarification’ and ‘does not meet requirements’. Record observations rather than personal impressions. Ask separately what support the candidate needs. If your team cannot provide it, that is a compatibility issue, not necessarily a weakness on the entrepreneur's part.

5. Separate candidate approval from the grant of rights

Approving a candidate does not yet give them the right to operate under your brand. In Russia, commercial concession agreements—the legal framework used for franchising—are specifically regulated by Chapter 54 of the Civil Code of the Russian Federation. Under Article 1027, the parties may be commercial organisations or registered individual entrepreneurs. A candidate without that status may take part in negotiations, but must obtain it before entering into the agreement.

Article 1028 of the Civil Code requires the agreement to be in writing. It is the grant of the right to use the package of exclusive rights that must be registered with Rospatent, Russia's intellectual property office—not simply the selection of a partner. Without registration, the grant of rights is deemed not to have taken place. You must therefore coordinate the date on which the partner may start using the brand with completion of the legal formalities.

Practical takeaway: before starting your search, prepare a candidate profile, questionnaire, assessment sheet and grounds for rejection. Choose your first franchisee on the basis of a demonstrated ability to run the business and work with you, not a willingness to pay faster than everyone else.