HOW TO FIND THE RIGHT PARTNER

Finding the right business partner, whether in a franchise or otherwise, is related to chemistry and compatibility of character with the potential partner, and, most importantly, trust. Daniel During, principal and managing director of Thomas Klein Inter

TRUST IS KEY

Whether you are finding a joint-venture partner, or an investor, or a franchisee, make sure you get along before any other consideration takes place. If the chemistry and understanding are there, all business issues can be resolved. My dad always used to say: “If you do not trust a handshake, do not sign a contract”, and I still believe in this whole-heartedly.

MIND THE CONTRACT

Contracts and formal agreements serve the purpose of clarifying doubts, and should, when something goes wrong or turns nasty later on, be the backup you rely on. You do not really look at the contract in the day-today business relations with your partner, and I have found that often, both parties go well beyond the contract stipulations. On many occasions, you may do things for the other person that you don't need to do, just for the sake of maintaining the relationship, and mostly you do so willingly because of the good relationship you have with them.

GOOD WILL

The second most important element in any business relationship is the good-will of your potential franchisee. He or she may not always have the necessary knowledge to operate a franchise, but if there is willingness to learn, it is sometimes better than having someone who may have the knowledge, but is not willing to implement it.

THE ‘TECHNICALLY’ BEST BUSINESS PARTNER IS:

• Ideally you want them to have a proven record of operating similar food and beverage concepts. Operating fast-food outlets is obviously very different to operating a premium or casual-dining restaurant. Not only are the requirements and the skills set required to operate these types of outlets different, but the people at the front, who will be dealing with your guests, will also be considerably different, both in character and skills.

• In addition to the professional ability of your partner, you should also look at their financial capability. It is crucial for you to first look at your business expansion plan, and then analyze whether your potential franchisee has the financial capability to grant such an expansion plan. If the franchisee does not have the finance available immediately, you need to define whether your potential franchisee can come up with the necessary funds to grant such an expansion, and also, how they will obtain the funds or the loans required.

• At this point you really need to ask yourself the following crucial questions: ‘Do I want to work with a franchise partner who does not have the funds available immediately?’, ‘Will the franchisee be able to obtain the required finance externally?’ A word of warning: Be very careful in choosing a business partner

who needs to finance future expansion plans, as that could involve paying high interest rates or mortgages, something that will eat from the profitability of the business.

• Another consideration is whether you are dealing with an individual or a group of investors. It can be risky if you are dealing with the manager of a group and you do not know the investor personally, as all the factors will be related to who, ultimately, calls the shots. Managers can change too, while the owners, in general, remain the same. Make sure you know who makes all the financial decisions, and who is ultimately, the final decision-maker. • Finding an ethical partner with a proven track record, and whose values are in line with yours, is also key. There are many things that can go wrong or get misguided over time, and it helps to know the actual investor or board director personally, in case something ‘sensitive’ ever happens. • It is important to define your expansion strategy well before choosing a business partner or partners. This will determine whether you want to strategically have one partner for an entire region or whether you want to have a different partner in each country. The advantage of having one partner per region is that it gives you less of a headache, as you only have to train one franchisee and deal with only one person. It therefore demands fewer resources from you. In theory, when you have one partner, once the systems are in place, the expansion has the potential to be exponential and things should operate smoothly. However, if the partner proves to have not been the right one, then you will have no good partners in the entire region. Putting all your eggs in one basket can sometimes be dangerous…

• Having separate partners in a region means you will require a bigger support team to manage them all. However, you can expand faster, as each franchisee will be opening simultaneously. A variety of partners in a region also gives you the advantage of being able to charge multiple individual country fees, rather than relying on only one partner who will be negotiating a lower single territorial fee. Before you approach a franchisee (or reply to one who approached you), I recommend you focus on your requirements and expectations regarding expansion. Then value the potential partner’s financial capability, his business ethics, area of coverage and experience in the business. Once you have strategically shortlisted your potential partners based on the four criteria above, meet them over coffee and see how the conversation goes.

If you do not trust a handshake, do not sign a contract