Franchisors look for a minimum requirements to ensure that all their franchisees are qualified enough in terms of personal finances and professional qualifications.
A franchise agreement is a long term contract that bonds franchisor and franchisee, the success and/or failure of any new franchise unit affects the business and brand reputation among customers and future prospective franchisees.
It is not a surprise, then, that franchises look for very well qualified individuals to be their new franchisees. Qualification requirements vary significantly depending on the franchisor and the type of franchise that the investor is buying. However, the following are often taken into consideration:
Credit score – Franchisors look for a minimum credit score that assures that the investor has good reputation with lenders, most franchises look for a score of 680 or higher.
Net worth – Almost every franchise has a net worth requirement for franchisees. Before being considered for the franchise investment, the investor might have to prove that has a certain minimum net worth. The franchisor needs to be sure the investor is financially solid to start the new venture. Each franchise has its own net worth requirement.
Cash on hand – Every franchise investor need to have enough cash on hand to cover the franchise initial costs and operational expenses.
Outside income – You should have other forms of income and resources to help with living expenses while you get the franchise off the ground.
Management experience – While specific industry experience is generally not required but some management experience is always welcomed. The investor that buys a franchise will be primarily responsible for leading a team and managing a business.
According to the International Franchise Association (IFA). Franchisees are typically:
Between 35 and 55 years old
With average income of $60,000 or higher
Have a net worth of $250,000 or higher
Have corporate management experience
Have an IRA or 401K retirement plan
Have not owned a business before.
A franchise is a long term commitment, franchisors need that the prospective franchisee meets a minimum standard regarding credit score, net worth, available capital and experience.