A Transparent Look Into the Franchise Discovery Process
March 29, 2022
The journey to becoming a franchise owner is exciting. The question is, where do you start?
Let us explain the franchise discovery process to help you make an informed decision. Ultimately, the goal is to ensure you understand every aspect of the business before committing valuable time and resources.
What is the Franchise Discovery Process?
The franchise discovery process describes the steps you will take to evaluate a franchise opportunity. It can be related to a typical interview process in that both parties are exploring the viability of the other. It is structured so that you and the franchisor can learn more about each other and determine if there is a mutual interest.
A franchise development representative will lead each step, but it is a very collaborative process, and it will likely include other members of the corporate team. The purpose is to educate you, the potential franchisee, on the business more than it is to sell you on it.
You will have all the information needed to make a final decision by the end of the process.
Step by Step Overview of the Franchise Buying Process
The franchise discovery process can vary slightly from one organization to the next, but many use the same basic framework. This approach can be helpful when comparing multiple franchise opportunities side-by-side.
The process will usually take three to four months to complete. However, there is no hard and fast rule for how quickly you move through it.
Step 1: Brand overview and introductions
Most candidates are familiar with the franchise opportunity before the formal sales process begins. However, it always helps to speak with a franchise development representative to establish a relationship and learn more about the franchise concept and value proposition.
This step begins by submitting a request for consideration. This is a confidential, non-binding application demonstrating your interest in exploring a franchise opportunity, and there is no obligation or commitment to invest at this point. Once the franchisor has received your request, they will set up a call to discuss the brand, learn about your background and goals, and determine if the franchise is a good fit.
Step 2: Brand Review
Next, you will receive more information about the business, including its mission, objective, and unique value proposition. Most franchisors will provide a combination of videos, printed materials, and discussion opportunities.
This step is your opportunity to deep-dive into the franchise concept and address initial questions and concerns. Be sure to ask about any topics you would like to explore further. There may be more information on that topic that the franchisor can share.
Step 3: Review of Unit Economics and Franchise Disclosure Document
The third step is where things get more exciting. This is where the franchisor walks you through the Franchise Disclosure Document (FDD), explaining each section and adding context where necessary.
The FDD provides a detailed look into the brand, its business model, and the roles of the franchisor and franchisee. The goal is to ensure you understand every aspect of the business and mutual obligations. The franchisor pays special attention to the Item 19, which provides insight into the financial performance of existing franchisees and profit potential.
Typically, you will also discuss available territories, demographics, and other logistical factors.
Step 4: Franchise Validation
If you choose to move forward, you will have an opportunity to validate the opportunity before meeting the corporate team. Franchise validation is your chance to speak with existing franchise owners about the support and training that the franchisor offers, the time it takes to make a profit, and any other questions you may have.
Ultimately, you want to have a well-rounded conversation that is honest and transparent about the strengths and weaknesses of the franchisor.
Step 5: Discovery Day Event
Then, the final step before you buy the franchise is to attend a discovery day, commonly referred to as a meet the team day. Candidates attend discovery day at the brand headquarters, where they will meet the team, ask any final questions, and learn about the operations firsthand.
Many candidates also use this time to build relationships with the leadership team, which we strongly recommend. A franchisor-franchisee relationship is similar to a marriage. You will work together for many years and are committed to each other through good and challenging times.
Step 6: Making the Decision
Finally, once you’ve attended the discovery day and have received an award letter, you will receive a Franchise Agreement for your review and signature. Once signed, congratulations, you are officially a franchise owner!