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The Journey of a Lead: Explaining the Franchise Application Process

Franchisee Prospect Insights 2015 - Application Process


As you can see above, our 2015 Prospective Franchisee Survey reveals that many prospects are unclear about the franchise application process. We have compiled this article to provide you with a better idea of how franchise business operators start as leads and then progress to become prospects and finally franchisees.


Franchise Application Process

The General Franchise Application Process


Lead Submission

A lead is the first indication a franchise has that a person is interested in joining their franchise network.


Lead Form Example - Subway

Franchise exhibitions and fairs are common first introduction points between franchises and those interested in buying a franchise. Some introductions are also virtual through a franchise website or franchise portals, such as Franchise Direct. When using a franchise portal, the franchise notifies of a person’s interest by submitting a lead form.


A lead form is located at the bottom of each franchise’s sales profile. Interested individuals need only enter their contact information in the lead form and submit. If approved, the lead form is then directly sent to the company representative who initiates making contact to start the application process. 


Most franchisors reach out to leads within one week of receiving their information. “It is important to reach out to prospects as soon as possible at the peak of their interest level,” says Tim Courtney, VP of Franchise Development for CruiseOne, a travel franchise business. “If a prospect contacts us during operating hours, a Franchise Development Specialist will be in touch within the hour. Otherwise, prospects can expect a response within 48 hours. The Franchise Development Specialist helps prospects through the selection process, answers all questions and determines if this is a mutually beneficial fit.”


So what should someone be prepared to discuss during the first conversation with the franchisor?


For starters, why do want to buy a franchise? What attracted you to that specific franchise? What are your goals and expectations? Why would you make a good franchise owner? What are your professional passions?


Any relevant experience that you possess working within the franchise’s particular sector may also be discussed. Nonetheless, many starting out with little or no experience in a specific sector are offered training programs that allow determined and passionate franchisees to successfully manage their new business.


Man on the Phone Using Laptop


How about money? Financial discussions are typically held off until later in the franchise application process though franchisors might ask questions to get an idea of how comfortable a candidate is with the required investment. For example, CruiseOne focuses financial questions during the first call on the initial franchise fee while other finance questions are discussed later in the process.


The Prospect Phase

Once this initial screening is complete, a lead form submitter becomes a prospect, or someone seriously interested in becoming a franchisee who demonstrates that desire with veritable steps, including the submission of a formal application.


Once a franchise determines a person is a legitimate prospect, research intensifies and due diligence begins. This is the period when a prospect gathers as much information as possible to determine if the franchise is a good fit.


According to Courtney, “Perhaps [the] most important step is the research phase when the prospect receives the Franchise Disclosure Document (FDD) and conducts their due diligence.”


An FDD is a comprehensive document that details a franchise. FDDs encompass 23 items with additional exhibits. Information within the FDD includes the history of the franchise, background on corporate leadership, franchise turnover rates, termination causes, fees, rules, restrictions and numerous other facts pertaining to that particular franchise. Franchisors are required by the Federal Trade Commission (FTC) to present potential franchisees with an FDD at least 14 days before a contract is signed. 


“The FDD is the window into the operations of a franchise and is regulated by the Federal Trade Commission. We recommend reviewing the FDD with a legal advisor.” Now is also the time to ask questions and consult closely with the franchise representative to learn all that you can.


Two Businesswomen MeetingIn addition to the information contained in the FDD related to the running of the franchise, a very useful section of the FDD is the list of franchisees and their contact information. The list allows prospects to interview current and past franchise owners about their experiences and satisfaction levels.


Also, “if it is important to you, visit the corporate headquarters and meet key executives running the day-to-day operations,” adds Courtney. “Ultimately, you have to be as comfortable with the team as they are with you in order to have a successful franchise relationship.”  


Many franchises hold, and some require, meet-and-greets for prospective franchisees. These events are sometimes referred to as a “Discovery Day.” Discovery Days enable prospective franchisees to gather in-depth information and learn about the franchise. The event is usually held at the franchise’s corporate office and tours of the facilities are arranged. Designated franchise locations currently in operation also host Discovery Day events at times. There is usually ample opportunity to meet and develop relationships with major players in the franchise as well as other franchisees during these events.


Signing the franchise agreement and making it official after performing your due diligence research is the final step if you believe the franchise you’ve been researching is the right one for you.


Signing the Franchise Agreement

The length of time between receiving a lead and signing the contract varies and is often dependent upon how much due diligence was completed before reaching out to the franchisor as well as how long it takes the prospect to secure any necessary financing. For resources on funding a franchise venture, please visit our financing a franchise section.


Two Businessmen Signing Papers

Of prime importance: move at your own pace. “Remember, never be sold the franchise opportunity,” Courtney says. “Make the decision based on your research. Take your time in understanding the Franchise Disclosure Document, particularly Item 19, which discloses the company’s financial status and provides a snapshot of how franchisees are performing.” It’s your money and your future, so be sure that you are 100% comfortable with your decision when you sign the franchise agreement.


For a franchise decision day checklist, view The Franchise King’s 8 things to do before finalizing your franchise decision.

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