Buying a franchise is more like dating than shopping for furniture. When you buy a franchise, the franchise also has to choose you. After all, no quality franchisor wants to go into business with a franchisee unless there is a comfortable fit.
A franchisor-franchisee relationship will last years, so it has to work for both parties.
A positive relationship begins with a good first impression. Let’s take a look at what franchisors are looking for so you can put your best foot forward. Then, I’ll walk you through the other steps of interviewing with a franchisor on your way towards closing a successful deal.
What Franchisors Are Looking For in Franchise Candidates
Franchisors look for candidates who are good listeners and confident leaders.
They want franchisees to be educated about the franchise and the industry, at least in a general way. This shows that the candidate is serious about the idea of owning a unit in the franchise. It also helps to show interest in the territory available.
The ideal franchise candidate will have a strong work ethic, business acumen, and management skills. However, the most important quality a franchisor needs to see in a franchisee is a willingness to learn and follow prescribed processes.
A franchise candidate who shows interest in modifying a franchise system may scare off a franchisor. So, be careful about how you present yourself. It is appropriate to ask the franchisor questions (even about their systems and processes to get a better understanding), listen to their answers, respond thoughtfully, and show positive interest where possible. A good franchisor will be open to consider different ways- but the best timing of that is when a franchisee has done things the franchisor’s proven ways first.
The Franchise Application Process
Typically, if you’re interested in a franchise, you’ll reach out in one of two ways. Either you’ll call or email the franchise. Or you’ll have a connection, like a franchise consultant, introduce you.
What to Expect When You Contact a Franchise
Franchisors receive hundreds of inquiries per day. Many do not respond to direct inquiries. Instead, they screen inquiries to save time.
First, many franchisors will only respond to inquiries if your area is under development. If the person screening inquiries does not see that your zip code matches the areas they are developing, they might simply ignore your inquiry. Often, a franchise will often only sell locations to people that are already franchisees of that brand. This is often the case with very successful, established franchises.
Completing a Franchisee Application Form
Once a franchise responds, they will likely provide you with a detailed application form. This will serve as a preliminary check on your financial and personal qualifications. Franchisors also use the form to observe whether you’re willing to follow instructions. After all, this is one of the most important qualifications they’re looking for.
Today, many franchisors use a personality assessment to further evaluate whether you’re a good match for their system. An assessment like this also helps a franchise to identify areas where you may benefit from extra support.
If you pass the screenings, a sales representative may contact you to arrange an appointment. This appointment is just to continue the exploration process. It’s not yet a signal that you’re in, or that the franchise is a good fit for you.
A Shortcut Through the Application Process
One way to pass through this qualification process more rapidly is to work with a franchise consultant. (Disclosure: I’m a franchise consultant!)
Franchises who have elected to work with a franchise consultant essentially trust the consultant to conduct due diligence on candidates and to only refer quality prospects. A referral from a franchise consultant allows a prospect to fast track to more serious discussions with a franchise.
Speaking with a Franchise Development Representative
A franchise development representative is charged with both evaluating you as a candidate while also “selling” you on the franchise. Like a dating relationship, you’re both auditioning and evaluating to see if there is a fit.
In your conversation with a representative, you’ll learn foundational information about the franchise system. They’ll likely discuss what products and services the franchise sells, how the business is structured, and the franchise’s core competitive advantages.
The representative may tell you that certain questions will be better answered at future stages of the diligence process. If you hear this, just know that the rep isn’t being evasive. Instead, just ask them politely when you can best get an answer to your questions.
Questions a Franchise Development Representative Might Ask
To qualify you as a franchise candidate, a franchisee will interview you.
To help you prepare for an interview, it might help to know what questions the franchisor may ask. These are some questions that franchisors I work with have asked candidates.
- What interests you in this franchise?
- What is your management experience?
- When do you plan to make a decision?
- Do you plan to operate the franchise yourself, hire a manager right away, or start as an owner/operator and hire a manager later?
- How do you plan on funding your franchise?
- How many territories are you interested in purchasing?
Show Interest in Learning (Not Changing) the Franchise System
Typically in an interview, sharing your expertise is a positive. However, in a franchise interview, it’s more important to emphasize your interest in following the franchisor’s system.
For example, if you’ve been a personal trainer, you might discuss how you motivate clients and plan workout routines. But, in a franchise interview, you’d be better off expressing what you admire about the fitness franchise.
The franchisor would rather work with a candidate who shows eagerness to learn an established system than a candidate who asks about what can be reworked.
Setting a Timeline
If the franchise development representative feels that you’re still a good fit, they will work with you to establish a timeline for conducting due diligence and making a decision.
The Due Diligence Process
After you and a franchisor agree to a timeline, you will usually receive information in multiple sources and formats to help you reach a confident conclusion about whether to proceed with a franchise.
Be sure to engage with each step of the diligence process if you’d like to show the franchisor that you’re serious about potentially working with them.
Meeting Franchisees
Once a franchise development representative has validated your seriousness, they will typically offer to put you in touch with current franchisees.
Existing franchisees can be very generous with their time. Meeting them is a fantastic way to get to know exactly what it’s like to operate within the franchise you’re investigating.
Reading Promotional Literature
Next, the franchisor may send you a packet of promotional literature. Some of this may be designed specifically for franchise candidates. Often though franchises will share the promotional materials that they use to market to customers. These materials will give you an idea of the branding, messaging, and targeting that the franchise has established.
I recommend reading through this literature with an eye towards the quality and consistency of each material. A good brand will have a distinct target audience and method for reaching them.
Invitation to Discovery Day
Ideally, the franchise development representative will invite you to Discovery Day. This is an opportunity to travel to the franchise headquarters and meet the franchise support personnel – the individuals who you will work with if you buy a franchise unit.
Some franchisors pay for part of your expenses in attending Discovery Day. Whether they do or not, it’s important to take the franchise up on their offer to attend. A franchise’s Discovery Day is the day when many of my candidates get the strongest feeling whether the franchise is right for them or not. I like to compare it to “meeting the parents” before you decide for sure to get married.
Continuing Discussions
Expect to meet with the franchise development representatives multiple times as you continue your due diligence. During these meetings, you might discuss:
- The franchise’s history
- The future vision for the franchise
- Customer demographics
- Local marketing methods
- Location site selection
Reading the Franchise Disclosure Document
At some point, you’ll receive a copy of the Franchise Disclosure Document (FDD). Typically, the franchise representative will schedule a call to discuss any questions you have after you review the document.
I’ve published a guide on how to review an FDD. I highly recommend reviewing this guide for pointers on what to look for as you read each item within the document.
If you wish, you can have an attorney review the FDD or discuss it with a franchise consultant you trust. If you do have an attorney review it- it is best to use an attorney that specializes in reviewing these documents- or you will end up wasting your time and money on the wrong attorney.
Signing the FDD Receipt
The FDD comes with a single page receipt. You should sign and date this receipt and return it to the franchisor.
To protect you from pressure tactics, US law stipulates that you must have the FDD in your possession for two weeks before you can sign any kind of purchase agreement.
Signing the receipt therefore allows you to purchase the franchise once you’ve made a decision on it. (Otherwise, after making a decision, you would have to sign the receipt and then wait two weeks.) Signing the receipt is thus a standard practice to signal to the franchise that you plan to review the franchise and continue your investigation.
Keep in mind, signing the receipt does not commit you to the franchise in any way.
Due Diligence Tips
Study Three Franchises at a Time
I highly recommend that you review multiple franchises simultaneously. This allows you to make a call between multiple good options rather than simply going along with the only option you’ve analyzed.
I suggest studying about three franchises that seriously interest you so that you can have a good selection of options.
Maintain Separate Notebooks
I recommend buying three notebooks where you can take notes about each franchise you study.
In each notebook, write down a list of questions that you want to ask each franchisor. Take notes as you get answers to each question. Write down the answers you get from the franchise representative as well as the franchisees you interview. Speaking to multiple sources will allow you to cross-validate the answers you receive.
Buying three notebooks like this keeps your records clean for each franchise. That way, you won’t accidentally show a franchise you’re speaking to what other franchises you’re studying.
Appreciate the Information
The information you receive can feel overwhelming, and that’s normal.
Remember, this is a good thing!
You want to have plenty of information to review. This is essential so that you can go into a franchise agreement with your eyes wide open.
Dedicate Some Time Each Week
During the franchise review process, it’s important to stay focused, organized, and disciplined. It’s important that each week you spend at least a couple hours reviewing materials for each franchise you’re in contact with. Otherwise, you can lose momentum or send a bad signal to the franchise that you’re not very interested.
Be Genuine
Remember, you’re not the only buyer here. The franchisor has just as much cause to invest time in performing due diligence on you as a partner in their business. My advice is to be genuine, show that you’re ready to learn, and come to all meetings with the intention of forming a productive, mutually beneficial relationship.