Buying a franchise is not like buying a car. You can’t walk in and say “I’ll take it”. The franchise buying process is about seeing if you and the business are a right fit.
The process is designed for you and the franchisor to get to know each other. First you will give them some information, then they will give you some information, then it will go back and forth like that.
Every franchise has its own process. Some are more regimented than others. Typically, the more established the franchise, the more precise the process.
The process is driven by the franchisor. They are not only trying to see if you are a right fit, but if you can follow a process. Let’s face it, when you buy into a franchise system, you are buying into their way of doing things, their process.
If you can’t follow their timelines, get the tasks done and make things happen as outlined, you may not be a good franchisee in the future. The trashheaps of franchises are littered with people who wanted to “do it their way” and promptly went out of business.
The Franchise Buying Process
Generally you will encounter the following steps, though the order and exact steps vary by franchise.
Some steps may be combined or omitted. But you will notice that no one is trying to sell you a franchise. They want to see if they should invite you in.
- The Introductory Call- this is your first contact with the franchisor and will briefly qualify you. They are looking at time, money and motivation. When do you want to buy, do you have enough money and are you motivated to go through the process and run a business.
- The Overview Call-just what it sounds like, this call is going to give you an overview of the franchise. It most likely will be a webinar where they will share their screen and a presentation with you.
- More In-Depth Webinars = These can include calls with Operations, Marketing, Technology, etc. based on the type of franchise that you are exploring.
- Homework – This might include market analysis, proformas, web information.
- Financing. At about this point, if you need to get financing for your franchise, you should talk with your consultant or franchise about finding out about your options. Some financing options can take months, so best to know sooner than later.
- Application and Assessments-This is where you will fill out financial disclosure forms and take an assessment that often scores you against their top performers.
- Franchise Disclosure Document- You will receive a disclosure document about the franchise. This document is made up of 23 items required by the Federal Trade Commission, which oversees franchise registration. All but one item is required. (Item 19 the Earnings Claim is optional). This document is a wealth of information and you should spend time with this, gather questions and ask the franchisor about them. You have to have the FDD in hand for 14 days before you can sign an agreement (and an agreement for 7 days as well) You will also receive a sample copy of the agreement that you will sign. Make sure you read this dicument thoroughly.
- FDD Discussion-This is where you go over your questions about the FDD.
- Territory Discussion-You may have an opportunity to discuss how your territory will be defined and if you have any room for negotiation.
- Senior Management Call-Depending on the franchise, there is often a senior manager from the CEO to the Sr VP or Managing Director, who will spend time on a call with you as well. The Development Director/Manager will have presented you as a viable candidate before this call can happen.
- Validation Calls-This is one of the most important steps. Here is where you get to talk to the people who are doing the business every day; the current franchisees. You’ll call a number of existing franchisees and ask them anything you feel you need to know to make a decision about moving forward with the franchise. Keep in mind, these franchisees will also be giving feedback about you to the franchisor.
- Discovery Day. Discovery Day (or Meet The Team) is when you go to the prospective franchisors headquarters (there are variations on where this takes place). It is an opportunity to meet each other and all the people who will be working with you in training, operations and marketing.
- Invitation to become a franchise. This is when a franchise decides that they would like you to become a part of their system.
- The Franchise Agreement. If you said yes, You will receive an agreement with you specific territory and any state addendum that is specific to you. You have to have it in hand a minimum of 7 days before you can sign it.
It is important to be timely and follow the process, And at some point, you’ll have to make a decision, but it isn’t right away. The process is in place to help you and the franchisor. If for some reason it doesn’t work out with one franchise, that is okay. You will decide if franchising is right for you and if it is, then there are more options out there for you.
As always, if I can help-reach out at firstname.lastname@example.org or schedule an appointment.