Launching a Franchise in Taiwan: How to Assess Applicants and Set Rejection Criteria

When turning an existing business in Taiwan into a franchise network, finding the right first partners often matters more than the number of applications received. Approving applicants solely on proof of funds, personal referrals or interview impressions can leave problems such as weak management skills and mismatched expectations unresolved until after a branch opens. Before recruitment begins, the franchisor should establish an applicant assessment process based on verifiable evidence and clear reasoning, rather than waiting until the franchise fee has been paid to get to know the applicant.

1. Define the right person, not the ideal CV

Assessment criteria should reflect the skills needed to run an outlet. Start by asking existing managers to identify the most difficult day-to-day tasks, such as allocating staff during busy periods, managing wastage, reading operating reports, and accepting brand standards and suggestions for improvement. Translate these into capabilities that applicants need to demonstrate.

Divide the criteria into three categories:

• Essential requirements: Applicants can explain their funding sources and working capital arrangements, understand their responsibilities as independent business owners, and are willing to comply with clearly explained brand requirements.
• Skills that can be developed: Staff scheduling, inventory analysis and on-site team leadership can be improved through training, but completion requirements should be defined.
• Reasons to defer a decision: Funding arrangements remain disputed, key decision-makers have not been involved, or the applicant insists that the franchisor must guarantee they will recoup their investment.

Do not assume that relevant experience automatically makes someone a suitable franchisee. An experienced operator may resist shared standards, while a first-time business owner may have strong management skills and an aptitude for learning. Every criterion should answer one question: how does this relate to the practical demands of running this brand’s business?

Put the criteria into a standard assessment form, specifying the evidence required and who is responsible for reviewing it. Avoid using age, family circumstances or personal preferences as substitutes for assessing capability. Recruitment staff should not be allowed to lower the threshold simply to meet signing targets.

2. Verify capabilities through scenarios, not just interviews

Interviews often produce stock answers such as ‘I am happy to cooperate’ or ‘I work well under pressure’. The franchisor should use scenarios drawn from situations its outlets have actually faced, with personal and sensitive information removed, to observe how applicants make decisions.

For example, provide a mock staff rota in which two employees are unexpectedly absent. Ask the applicant to explain how they would manage service, staff breaks and customer waiting times. Then provide a simplified operating report and ask them to identify possible reasons for a cash shortfall. The aim is not to expect a newcomer to get everything right immediately, but to understand whether they check information, identify risks and seek support.

Financial assessment should also go beyond asking how much money the applicant has available. Establish when the funds will be available, whether they include borrowing, whether the applicant must also cover household expenses, and how they would maintain working capital if opening were delayed. This does not mean making investment decisions on the applicant’s behalf; it means checking whether their plan is internally consistent.

Consider arranging an outlet observation visit, followed by a discussion, without requiring the applicant to perform any actual work. This gives them a sense of the real pace of operations. Do not disguise unpaid trial work as an assessment. If the visit involves providing labour, establish the applicable responsibilities and arrangements separately.

Each assessment should record what was observed and what evidence is still missing, rather than simply stating that the applicant ‘seems reliable’. Using the same questions for the same scenario helps reduce inconsistencies between interviewers.

3. Keep eligibility assessment separate from legal disclosure requirements

Taiwan does not have a single, comprehensive franchise-specific law, but franchising is not unregulated. The Fair Trade Act and the Fair Trade Commission’s Guidelines on the Business Practices of Franchisors address the disclosure of important information during recruitment and contractual procedures. Contractual rights and obligations also fall under the Civil Code. The Personal Data Protection Act must also be considered when collecting applicant information.

Assessing an applicant’s eligibility does not allow the franchisor to delay legally required franchise disclosures. Under the guidelines, important information should be provided ten days before entering into a franchise relationship or preliminary franchise relationship, or within a period considered reasonable in the circumstances or agreed by both parties. The disclosures cover matters including fees, intellectual property rights, operational support, trading-area plans, operating restrictions, and contract amendments and termination. Failure to provide the required information without proper justification may breach Article 25 of the Fair Trade Act if it is sufficient to affect trading order.

In particular, do not use a ‘paid selection process’ to sidestep these procedures. If an applicant pays a fee, signs franchise-related documents and agrees that withdrawing will result in forfeiture of the payment or liability for compensation, a preliminary franchise relationship may already have been established. Calling the document an application form does not remove the relevant requirements.

Approval also does not mean that the applicant must sign immediately. Before signing, they must still be given at least five days to review the contract, or a period considered reasonable in the circumstances. As a rule, the contract must also be handed over within 30 days of signing.

At the application stage, collect only the information genuinely needed at that point, and explain its purpose, who will have access to it and how it will be retained. Do not request extensive family or financial information unrelated to the applicant’s ability to operate a franchise merely to make the assessment appear rigorous.

4. Set clear outcomes: approve, defer or reject

An assessment should offer more than a choice between signing and not signing. The franchisor can establish three outcomes, subject to review by operational or management staff outside the recruitment team:

• Approved: Evidence supports the essential requirements, but the applicant must still complete the disclosure review and formal contractual process.
• Deferred: Specify outstanding matters, such as confirmation that funding is available or improvements in management capability, and set out how reassessment will take place.
• Rejected: Record verifiable, business-related reasons internally and communicate the outcome clearly without disparaging the applicant.

Any exceptional approval should record the reasons, the person authorising it and the measures to address outstanding concerns. Do not bypass existing standards simply because an applicant is willing to open several outlets at once. If the franchisor lacks the capacity to provide support, it should also stop the process rather than place all responsibility for the risks on the applicant.

After an outlet opens, review the assessment records to identify which tests genuinely reflected operational needs and which questions had little predictive value. However, do not apply revised standards retrospectively to criticise franchisees who passed the original assessment.

Practical takeaway: Before formal recruitment begins, prepare a capability assessment form, a standard set of scenario questions and a system for recording approval decisions. Good selection is not about finding the person who gives the most polished answers. It helps both the franchisor and the applicant decide whether they are suited to a long-term partnership before committing their resources.