Why Franchisors Say No: Common Dealbreakers & How to Overcome Them

by | Jan 9, 2025

Purchasing a franchise is an exciting opportunity. However, the franchisor ultimately decides whether you’re awarded a franchise. Franchisors carefully evaluate candidates to ensure they’re the right fit for their business model and values.

While certain factors might disqualify you from owning a franchise, others that seem like dealbreakers may not matter as much as you think. Here’s a guide to help prospective franchisees understand the common reasons franchisors might say no—and what they can do to improve their chances.

Potential Dealbreakers When Buying a Franchise

Understanding the potential roadblocks can help you better prepare for the franchise application process. Here are some common franchise dealbreakers and how to proactively address them.

1. You Have Bad Credit

Financing is often essential when buying a franchise. You must be able to secure funds to cover your initial investment and costs during the startup period. If you have a poor credit history, it can signal financial instability to both franchisors and lenders. Bad credit can stem from missed payments, high debt, or other financial mismanagement.

How to Overcome It:

  • Review your credit report and address errors or unresolved issues.
  • Establish a history of on-time payments and reduce existing debt.
  • Provide evidence of recent financial improvement to demonstrate reliability.

2. You’ve Filed for Bankruptcy

Bankruptcy can be a red flag for franchisors, as it suggests significant financial struggles in the past. However, its impact depends on how long ago it occurred and the steps you’ve taken to recover.

How to Overcome It:

  • Highlight your financial recovery, such as rebuilding savings or improving credit.
  • Share your long-term financial plan to reassure the franchisor.
  • Demonstrate business acumen and commitment to fiscal responsibility.

RELATED CONTENT: Hierarchy of Competence – Are You Ready to Start a Business?

3. You Lack Liquid Capital

Most franchisors require potential franchisees to have a minimum amount of liquid capital. This ensures you can cover the initial franchise fee and sustain the business during its early stages when revenue may be limited. Additionally, many lenders require proof of liquid capital as part of the loan approval process, demonstrating your financial preparedness and ability to manage unforeseen expenses.

How to Overcome It:

  • Build savings over time or explore financial assistance programs.
  • Secure funding through partnerships, investors, or SBA loans.
  • Show a detailed budget that demonstrates your ability to manage finances effectively.

4. You Don’t Plan to Be Involved

Franchise ownership comes in different models, with some requiring significant hands-on involvement from the owner while others accommodate absentee or semi-absentee arrangements. However, if you plan to be completely uninvolved in the daily operations, this may not align with the expectations of certain franchisors.

How to Overcome It:

  • Be upfront about your desired level of involvement.
  • Present a plan that includes hiring a strong management team.
  • Seek franchises designed for semi-absentee or absentee ownership.

Common Concerns That Won’t Stop You

Not every concern is a dealbreaker. Here are some common worries potential franchisees have and why they shouldn’t hold you back from pursuing your dream.

1. You Don’t Have Business Experience

A common concern is that an individual has to have business or industry-related experience to pursue a franchise opportunity. However, many franchise owners are first-time business owners. Franchisors often provide comprehensive training programs and support to guide new franchisees through the process.

Tip: Highlight your willingness to learn, work ethic, and passion for the business.

RELATED CONTENT: 5 Qualities of Every Successful Home Care Owner

2. You’re Switching Industries

Franchisors value transferable skills like leadership, organization, and customer service over industry-specific experience. They’re often more interested in your potential than your past.

Tip: Share how your previous experiences have prepared you for franchise ownership, even if they’re in a different field.

3. Your Desired Location Isn’t Available

If your ideal territory is already taken, franchisors may propose alternative locations or options for multi-unit ownership.

Tip: Be open to exploring different markets. Discuss potential growth opportunities with the franchisor.

How Franchisors Assess Candidates

Franchisors evaluate candidates using a combination of factors, including:

  • Financial Fitness: Credit score, liquid assets, and overall financial stability.
  • Personal Attributes: Dedication, passion, and alignment with the company’s values.
  • Management Skills: Ability to lead teams and oversee daily operations.
  • Cultural Fit: Compatibility with the franchise’s mission and approach to business.

Being honest and transparent throughout the application process is critical. Dishonesty can be a dealbreaker, even if other qualifications are met.

Additional Tips to Increase Your Chances of Success

  1. Research the Franchise Thoroughly: Understanding the franchisor’s expectations and franchise business model is key to a successful application. Review the Franchise Disclosure Document (FDD) and ask questions during the discovery process.
  2. Build a Strong Financial Plan: Demonstrate your ability to manage finances by preparing a detailed budget. Explore various financing options and secure necessary funding. This showcasies your financial stability.
  3. Highlight Relevant Skills: Whether it’s customer service, management, or problem-solving, emphasize transferable skills that align with franchise ownership.
  4. Leverage Support Networks: Reach out to existing franchisees for insights into what the franchisor values most. Their advice can help you tailor your application and approach.

Are You Ready to Buy a Franchise?

Every franchise system has unique criteria for awarding locations, but the most important thing is to approach the process with preparation and transparency. By understanding potential dealbreakers and demonstrating your strengths, you can position yourself as an ideal candidate.

At Caring Senior Service, we’re passionate about empowering franchisees who share our commitment to serving others. With robust training programs and ongoing support, we help our franchise owners build successful businesses while making a difference in their communities. If you’re ready to to explore a home care franchise, reach out to our team today!

Other Related Posts: