The Franchise Buyer’s Guide: The Sales Process
“I’ve long held the belief that there are only three important aspects when it comes to sales success,” writes CEO and startup founder Chris Myers in Forbes magazine. “A quality product, the ability to empathize and a transparent and predictable process. Of these three, I’ve found that it is process that is most often neglected.”
Every franchise does things a little differently when onboarding new franchisees, but there are a few common steps in the process. In this entry we’re going to walk you through the major steps and outline: a) tasks you should be completing and questions you should ask yourself; and b) what support you should receive from the franchisor.
Let’s start at the beginning…
1. Application/Qualification
If you’ve done your homework (by which we mean, at the very least, read parts two through four of this series) you will have a good idea of which franchise opportunities are the best fit for you. Be sure to carefully follow all of the instructions when you apply and ensure you meet and exceed their requirements in advance. Once you pass the initial screening and introductions, you’re on to step two.
2. Franchise Disclosures
At this point you’ll receive the Franchise Disclosure Document, which will include all the key details of the franchise you’re planning to purchase.
In this document, the franchisor is obligated to provide financial details, including your startup costs, and rules by which you are expected to abide as a franchisee. Franchisors are also, in many jurisdictions, obligated to provide financial performance metrics even though, as mentioned in our “value” entry, they will not provide actual earnings.
Ideally, you want to review this document with both a financial expert to draft up a pro forma (essentially a forecast of your potential earnings) and a lawyer. But at this point in the process, you don’t typically sign the document or hand over any money.
3. Business Building
This refers to the ongoing, high-level conversations about how to make your franchise succeed. This is where the franchisor will outline your territory (the area your franchise covers), demographics (who your clients are), and begin to provide support on the logistics: real estate, marketing, equipment, etc. The amount of support will vary depending on the situation, but at the very least, the franchisor will walk you through how the franchise functions and explain what you’ll be responsible for doing.
4. Validation
This is the extremely important step during which you will talk to other franchisees to find out more about what the opportunity has in store. Some of the franchisee you’ll speak to will be handpicked by the franchisor, but you yourself need to ensure you speak with a representative sample. The aim is to have well-rounded and honest conversations—if it’s all positive or all negative, something is likely off.
5. Discovery Day
After validation, you’ll be invited to the franchise discovery day. This will be your opportunity to connect personally with the people running the company and to get a first-hand look at how the franchises operate behind the scenes.
“Most people use the discovery day to ask any final burning questions they still have and build a rapport with the CEO,” writes Chris Myers. “Never underestimate the importance of the discovery day when it comes to building relationships. I’ve seen deals fall apart at the 11th hour because the franchisee and franchisor simply didn’t click on a personal level.”
6. Closing
The final step, once everything is in order, is to sign off on all the documents and make your initial investment. As mentioned above, have an attorney and financial professional review the documents you’re about to sign, because after you do you won’t be able to recoup that money if you back out (and even if you do, franchisees are often forced to sign non-compete clauses which effectively locks them out of the industry for several years). It’s important to take plenty of time to contemplate the opportunity. Discuss it with family, and make sure you feel good about the decision.
Case Studies
Pizza Pizza
As the most popular pizza delivery and pick-up chain in the Greater Toronto Area, Pizza Pizza also goes well out of its way to ensure the success of new franchisees. The above described training process for a Pizza Pizza franchise takes about eight to 10 weeks in which the new owner is trained in food prep, business management, human resources and much more. But unlike many other franchise opportunities, the franchisor also offers ongoing professional development seminars and courses. They are also a turnkey business, meaning even if you are building a new restaurant, the franchisor has a designated design and construction team to do everything for your store from inception to opening day.
Get in the Loop Local
Like many non-food franchises the barrier to entry at Get in the Loop, a marketing franchise that supports local small businesses, is relatively low. But unlike many others, it provides personalized training and ongoing support to ensure your success. “Franchisees benefit from shared experience, group support and Get in the Loop’s dynamic, positive atmosphere of success,” it says on their website. There are also no technical skills or prior special training required, which in this case is a testament to their in-house training process.
A&W
A&W is an iconic fast food brand that in recent years has won a number of awards for its franchising practices. Given that A&W was one of the first fast food chains to begin franchising in 1921, it has had many years to fine tune their process. Each franchise location is assigned a business manager to personally usher the new franchisees through the training process. In addition to comprehensive training and mentorship, they also offer help in selecting location, lease negotiation, site planning, and more.
BuyAndSellABusiness.com is also running a buyer’s workshop for those looking to purchase any small business—franchise or otherwise. It’s just 30 minutes long and completely free. You can register at our website.
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Opinions expressed here by Contributors are their own.
