Step by Step Franchise Buying Process

By Kerry CroccoMay 22, 2020

Buying a franchise is an exciting venture and consists of several steps. It is important to note that before you become a franchise owner, the franchise sales process can take 3-6 months or even a year to complete. Additionally, it is also important to note that different franchisors may have different processes for awarding you a franchise and on-boarding you as a new franchisee.

However long the process is, it is a valuable time when prospective franchisees learn about the franchise operations and the franchisor gets a feel for whether or not the candidate is a good fit.

Here is the general franchise sales process that can apply to most franchises.

franchise sales process

1. Introduction

The introduction is pretty self-explanatory; when the franchisor and the prospective franchisee get to know each other. Although, this goes beyond having a casual conversation about the brand and your candidacy. The introduction involves a brand overview, including the history, the mission, and the values of the brand.

At this stage, the goal is to create a relationship between the two parties. It's imperative to discover if you have a shared interest in working together and accomplishing the objective and goals you establish.

2. Review of the Franchise Disclosure Document

Reviewing the Franchise Disclosure Document (FDD) is a critical part of the due diligence process. Most importantly, you'll learn about the franchise system's financials and details around your investment and start up costs. The FDD provides insights into the nature of the relationship the franchisee will have with the franchisor and outlines the Franchise Agreement. It helps the franchisee understand the franchisor better.

Since the FDD is quite cumbersome and contains legal details, it is best to have an attorney walk you through the document to thoroughly understand it. This way, you are clear about what the franchisor's expectations (and your obligations) are.

3. Logistics

In this step, the candidate receives support from the franchise's sales team on how to build the business. The franchise provides demographics, target markets, suitable real estate location suggestions, and assistance with other aspects of the business.

Basically, these discussions cover how the franchisee can successfully launch the business. Part of running a successful business is having a foundation of knowledge about the operating playbook. The franchisor tells you about the training process and the support that will be provided to allow you to follow its proven systems .

4. Validation

Next in the franchise sales process is hearing testimonials from former and current franchisees. It's highly recommended that each franchise candidate contact other franchise owners to have frank discussions about their experience. This is a great way to learn about the company's culture and how others view the franchise leaders and services. Then, it's a good idea to visit the different franchise locations and go through the franchise disclosure document again.

Collecting feedback from other franchisees is essential before signing a franchise agreement. Through this franchise sales process, you will be able to establish what you can expect from the franchise and identify any questions, issues, or concerns you may have.

5. Franchise Discovery Day

At this point, you and the franchisor will get to know each other well enough to determine if you will make a good team. Discovery Day usually takes place at the franchisor's corporate offices. Other potential candidates and franchisees may be in attendance as well. It is a perfect opportunity for you to learn about the franchise's operations and ask questions. By the end of this event, you will most likely have enough information to make an informed decision.

6. Closing

To help you make a decision, you may want to hire a consultant or consult with your attorney or accountant to evaluate whether the opportunity is right for you. If you are confident with the opportunity, you can close by signing the franchise agreement. At this point, you'll be asked to pay the necessary fees and then the exciting process of launching your franchise location begins.

These are the typical steps taken in buying a franchise and becoming a franchise owner. Depending on the franchise you are buying, the steps may vary. The franchise sales process is vital and requires transparency to identify if the franchisor and franchisee are a perfect match.

About the Author - Kerry Crocco

Marketing Coordinator for Franchise Solutions and Franchise.com; conduct email marketing campaigns, web page management and trade show coordination. Mother of two, wife and Young Living Essential Oils representative.
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