Franchise Research
Researching franchising can be a daunting task. You finally make that first step and reach out to one or more franchises and are immediately inundated with information which comes at a faster pace that ever in the digital age. However, if you stay focused, organized and methodical, it doesn’t have to be unpleasant, it should be exciting.
Typical Process
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Make the initial inquiry usually done online via an advertising source or the brand’s website.
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Receive and review materials from the franchise.
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Initial discussion varying from a member of the franchise department to an owner in a small brand.
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Complete franchise application. Some Brands will require a background check.
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Receive and review a Franchise Disclosure Document
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DEFINITION:
FRANCHISE DISCLOSURE DOCUMENT: TYPICALLY CALLED THE FDD, The Franchise Disclosure Document (FDD) is a legal document that the Federal Trade Commission (FTC) requires franchisors to provide to prospective franchisees before selling a franchise. The FDD is divided into twenty-three sections or “Items”, each of which require a franchisor to disclose certain information to assist prospective franchisees in making a well-informed decision before investing in the franchise. This information concerns the franchisor, the individuals and entities associated with the franchisor, the franchise opportunity, the fees charged by the franchisor, the franchisor-franchisee relationship, and other information about the offering. -
NOTE: you will be asked to sign a receipt for the FDD – this is nothing other than the franchisor complying with franchise regulations that require evidence of Disclosure (the act of providing the FDD) and commits the franchisee to absolutely nothing. Many of our clients ask if the FDD is same as signing a non-disclosure – it is not.
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Follow up calls and further review.
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Validation process whereby contacts existing franchisees in the system. A contact list of existing franchisees must be included in the franchisor’s FDD.
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NOTE: Many candidates do not know when seeking out franchises initially that they have the right to contact franchisees – this is a very important step in the research process and a chance to make early connections should they move forward with the brand.
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Visit with corporate at what is often called a “Discovery Day” or “Meet the Team Day” – our core brand Scenthound affectionately calls it “Meet the Pack Day”
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NOTE: Discovery Days are a great opportunity to meet the brand in person, check out their headquarters, possibly meet some franchisees, and visit with other individuals involved in franchise support but not necessarily franchise sales. Discovery Day should be part of the research process and nothing more. There are some aggressive franchises that treat it as a signing day but it should be viewed as one of the final stages of due diligence (on both sides of the fence as candidates are being vetted just the same).
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Decision time! Sign the franchise agreement and on the way towards the next phase of your life.
Research Tips:
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Stay organized and set up separate files for each brand you are researching. Keep notes on conversations with brands as well as franchisees spoken to during validation.
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Ask questions. Whatever you need to ask to become comfortable.
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Communicate – if at any point you become disinterested and wish to remove yourself it is recommended that you have the courtesy to alert your point person. There is often a reluctance to do this out of fear of being pushed – most reputable franchises will respect your decision and wish you the best. Plus, you always want to keep a door open.
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Don’t give up the process too early. You will learn throughout the entire process – there was a reason that compelled you to begin looking at franchises. If you bail on the process too early you are not giving yourself a chance to learn valuable information – even if the information leads to going a different direction it can still benefit you and give you a perspective as you compare brands.
