Selecting franchisees: how to vet a candidate before signing

The first person willing to buy your franchise will not necessarily be the right partner. For an established business owner, what matters more is whether the candidate can manage an outlet, fund its operations and follow the network’s rules. Poor selection decisions affect not only the two parties to the deal, but also the reputation of others in the franchise network. Before you start selling franchises, establish a clear vetting process that applies equally to every candidate.

1. Define the partner your model needs

Start with how your own business operates, rather than with an application form. If an outlet’s performance depends on day-to-day management involvement, you cannot sell the model as a passive investment. If it requires proactive local sales, experience in managing staff alone will not be enough.

Build a franchisee profile around four areas:

• Involvement: who will make day-to-day decisions, and how much time the owner is prepared to commit.
• Skills: which capabilities are needed from the outset, and which can be taught.
• Resources: where the money for opening and ongoing expenses will come from.
• Compatibility: whether the entrepreneur is willing to follow standards, submit reports and discuss any departures from agreed procedures.

Separate essential requirements from desirable qualities. For example, experience in your particular sector may be an advantage, while having a designated manager accountable for the outlet may be essential. Do not use age, marital status or personal rapport as selection criteria: assess circumstances relevant to running the future outlet.

Decide in advance how each essential requirement will be verified. Otherwise, the sales manager may treat a persuasive conversation as sufficient evidence, leaving the operations team with a partner whose actual capabilities are quite different.

2. Check financial readiness without promising a payback period

Asking ‘Do you have enough money?’ is of little use. Ask the candidate to break down their available funds into opening costs, mandatory payments, operating expenses and a contingency reserve. Establish separately how they will cover their personal expenses until the business generates a reliable income.

Clarify the source of funding: personal savings, bank borrowing, a shareholder loan or investor funds. The amounts are not the only consideration; timing, repayment terms and dependence on other events also matter. A property or asset sale that has not yet completed is not the same as an available budget.

The evidence requested should be proportionate to the task. You could ask for documents confirming approved finance or proof of funds with irrelevant details redacted. Do not request access to online banking or collect a complete history of personal transactions.

Discuss an adverse scenario: the opening is delayed, revenue grows more slowly than expected, or costs are higher than planned. Ask the candidate to explain how they would respond and which commitments they could continue to meet. This tests the resilience of their plans; it is not a reason to promise guaranteed income or prescribe the same contingency reserve for every outlet.

3. Review their business history and verify explanations

If the candidate already runs a business, check their company or individual entrepreneur registration using official public records in Russia. Extracts from the Unified State Register of Legal Entities (EGRUL) and the Unified State Register of Individual Entrepreneurs (EGRIP) help establish registration status and history. The commercial court case database records business disputes, Federal Bailiff Service (FSSP) records show enforcement proceedings, and the Unified Federal Register of Bankruptcy Information (EFRSB) contains published bankruptcy information.

Search using registration or tax identifiers, not just a surname or company name. Matching names can easily lead to mistaken conclusions. Record the date of each check, as information may change before the agreement is signed.

The existence of a court case does not, in itself, indicate misconduct. Look at the company’s role in the proceedings, the subject of the dispute and the outcome. Repeated claims from suppliers for unpaid bills warrant a separate discussion, but context matters even here.

Give the candidate an opportunity to explain what you have found. If they say a debt has been settled, ask for evidence. Use references from previous business partners as an additional source, not as a substitute for documents. Do not share the findings with other candidates or members of the network.

4. Use practical scenarios in the interview

Rather than asking a general question about entrepreneurial experience, present several situations drawn from the day-to-day running of your outlets. For example: the manager resigns just before opening; an employee suggests departing from a standard to save money; or a local advertising campaign generates no enquiries.

Ask the candidate to describe the steps they would take, who would be responsible and how they would check the outcome. Assess their ability to understand the problem, seek support and make a management decision, rather than whether their answer matches your preferred wording.

Be sure to discuss the limits of their autonomy. The candidate must understand that they are buying the right to operate within a defined system, while remaining an independent entrepreneur who bears their own business risks. Willingness to pay the franchise fee is not a substitute for willingness to manage the business.

If several investors are launching the business together, establish who will run the outlet and how they will resolve disagreements. Invite the proposed manager to a separate interview. An investor’s acceptance of the rules does not necessarily mean that the future manager is prepared to follow them.

5. Record the decision and observe legal requirements

In Russia, commercial concession agreements — the legal framework used for franchising — are governed by Chapter 54 of the Civil Code. Under Article 1027(3), the parties to such an agreement may be commercial organisations or registered individual entrepreneurs. You can discuss the project with someone who is only planning to register, but they must have the appropriate legal status when the agreement is concluded.

Candidates’ application forms, contact details and documents may contain personal data. Processing must comply with Federal Law No. 152-FZ ‘On Personal Data’: define the purpose, legal basis, information needed, retention periods and which employees will have access. Obtain consent where it is the required legal basis for processing, and do not collect excessive information.

Summarise the assessment in a short record covering verified facts, outstanding questions, material risks and the decision. Use three possible outcomes: proceed with preparations for the agreement, reconsider once specific conditions have been met, or decline. Conditions should be verifiable — for example, confirmation of funding or appointment of a manager — rather than a vague instruction to ‘be better prepared’.

Practical takeaway: before your first franchise sale, prepare a partner profile, a list of supporting evidence and an interview plan. Do not try to offset a candidate’s lack of readiness with a discount: a lasting partnership starts with a well-founded selection decision.