Launching a Franchise in Taiwan: How to Select Your First Franchisees and Build an Assessment Process

Having an established business does not mean that everyone interested in a franchise will make a suitable partner. Your first franchisees will directly affect the support workload at head office, the customer experience and the culture of cooperation across your franchise network. Rather than treating recruitment as a sales exercise, build a two-way assessment process: head office checks whether applicants can deliver, while applicants gain a realistic understanding of the work before deciding whether to commit.

1. Define the Partners You Need Before Accepting Applications

Before recruitment begins, the founder and those responsible for operations and training should jointly draw up a franchisee criteria checklist. These criteria should reflect the work actually required to run an outlet, rather than vague expectations of enthusiasm, belief in the brand or entrepreneurial spirit.

Focus your assessment on four areas:

• Operational commitment: Will the applicant manage the outlet personally? If they employ a manager, who will handle recruitment, supervision and cover for absences?
• Financial resilience: After paying the set-up costs, will they still have enough money for rent, wages, stock replenishment and personal living expenses?
• Execution and learning: Can they follow procedures, accept corrections and consistently record operational data?
• Commitment to shared standards: Do they understand why centralised purchasing, quality checks and brand standards are necessary?

Divide the criteria into essential requirements and skills that can be developed through training. For example, a lack of experience with a particular piece of equipment can be addressed through training. An applicant who refuses to follow essential food safety procedures, however, should not be allowed to secure approval by paying higher fees.

Clear, practical communication is particularly important among your first partners. Someone who simply says, ‘I’ll leave everything to head office’, may be less suitable than someone who asks numerous practical questions.

2. Verify Funding and Working Arrangements with Evidence

The initial application form should collect only enough information to decide whether to proceed to an interview, such as the proposed location, time available to commit, management experience and an overview of funding sources. Do not ask for full household financial records at the outset.

At the detailed assessment stage, ask applicants to explain the balance between their own funds and borrowing, their monthly repayment commitments and their cash arrangements once the outlet opens. Where financial verification is necessary, allow them to redact unrelated transactions and restrict internal access to the documents. The aim is not to find the wealthiest applicant, but to establish that short-term financial pressure will not lead them to compromise quality or fall behind on staff wages.

Use scenario discussions rather than promises of profit. For example, ask applicants how they would manage stock replenishment, staffing and cash if customer numbers were lower than expected during the opening period. Head office should clearly label these scenarios as assessment exercises, rather than presenting illustrative figures as guaranteed trading results.

Taiwan’s Personal Data Protection Act also applies to recruitment data. Head office should establish the lawful basis for collecting and using the information, meet applicable notification requirements, explain the purposes and duration of its use and the rights of the individuals concerned, and set rules for retention and deletion. Proof of financial resources should not be casually forwarded to recruitment group chats or retained indefinitely after an application has closed.

3. Arrange Structured Interviews and Outlet Observation

Asking every applicant the same core questions makes fair comparison easier. Rather than simply asking whether they are willing to cooperate, require them to explain what they would actually do:

• If the outlet manager takes leave at short notice and you cannot attend, how would you arrange cover?
• If a customer complaint conflicts with head office standards, what would you do first?
• If a supplier you know offers a lower price, how would you handle the requirement to use designated purchasing channels?
• If sales fall short of expectations, what support would you want from head office, and what action would you take yourself?

Next, arrange an observation visit that shows everyday tasks such as opening preparations, busy trading periods, stocktakes and closing procedures. Do not limit the visit to viewing the fit-out and trying products. Afterwards, ask applicants to summarise the key tasks and raise questions so that you can understand how they learn.

If the assessment involves hands-on work, clarify the nature of the activity, safety responsibilities and insurance arrangements in advance. Assessment must not be used as a pretext for unpaid labour. Whether an employment relationship exists will depend on the actual arrangements.

The assessment form can use three categories: ‘Meets requirements’, ‘Further evidence needed’ and ‘Does not meet requirements’, with specific evidence recorded for each judgement. Avoid vague notes such as ‘Good impression’, and do not let sales staff approve applications solely because they are under pressure to close deals.

4. Keep Approval, Payment and Withdrawal Separate

Once the assessment is complete, you can approve, conditionally approve, defer or reject an application. Conditional approval should specify what remains outstanding, such as confirmation of the person primarily responsible for operations, rather than collecting payment first and resolving the gaps later. Internally, specify who has authority to approve exceptions and record the reasons for doing so.

Taiwan does not have a single dedicated franchise law, but that does not mean franchising is unregulated. The Fair Trade Act and the Fair Trade Commission’s Disposal Directions (Guidelines) on the Business Practices of Franchisors impose specific requirements on recruitment and contracting. Contractual obligations are also governed by general legislation, including the Civil Code.

Pay particular attention to arrangements requiring a deposit before assessment. Under the guidelines, if an applicant pays a fee or signs documents such as a draft agreement, reservation form or letter of intent, with terms providing for forfeiture of fees or liability for compensation on withdrawal, a ‘preliminary franchise relationship’ may already have been formed. The rules cannot be disregarded simply because the document is not called a franchise agreement.

Under the guidelines, material franchise information should be supplied ten days before a franchise or preliminary franchise relationship is entered into, or within a period considered reasonable in the circumstances or agreed by both parties. Relevant contracts must also be made available for review for at least five days, or for a period considered reasonable in the circumstances. Failure to meet the applicable requirements may breach Article 25 of the Fair Trade Act if it amounts to obviously unfair conduct capable of affecting trading order. Passing the assessment should not be treated as a reason to collect payment and sign immediately.

Practical takeaway: Prepare a criteria checklist, a standard set of interview questions and an approval record before recruitment begins. The value of your first franchisees lies in their ability to work reliably with head office, not in how quickly they can pay.