There are variations from franchisor to franchisor, but the franchise sales process is generally made up of six major steps:
1. Initial Contact
You try a new restaurant and you enjoy the experience, the atmosphere, the interiors, and of course, the food. You are so impressed that you decide to ask if they are selling franchises. You’e in luck; they are selling franchises. You are given a brochure that contains facts about their franchise program, franchise fees, royalties, etc.
For most people, the decision to look into buying a particular franchise business comes from having experienced the service first-hand. For some, it comes from word-of-mouth information or from research – franchise trade shows, the internet, franchise associations, to name some. However your interest in a franchise is started, the initial contact is important because it gives you preliminary information about the company. First impressions are lasting.
The Initial Contact provides you with preliminary information about the company’s franchise program, franchise fees, royalties, phone numbers, email addresses. At this point, you may be asked to give your contact information in return so that you may be contacted in the future.
2. Initial Meeting with Company Representative
You then talk to a company representative who tells you about the company and their franchise program. The company representative is also able to answer some of your questions about the franchise program. Many companies will ask if you have a location that may be suited for the franchise.
More importantly, the company representative tells you what you need to do if you want to pursue your interest of franchising their company. You may be required to write a letter of intent, fill out an application form, describe your location, or all of the above.
At trade shows, this initial meeting with a company representative happens right at the booth. Outside of trade shows, this happens at the company’s offices or even right at the company-owned store. You may speak to the store’s manager or to a franchise sales personnel. On few occasions, it happens over the phone with the company’s franchise representative.
3. Site Evaluation
In many cases, a company will consider your application only if you have nominated a specific site. However, there are those who entertain your application even if you only have a general location in mind – somewhere in Quezon City, anywhere in Laguna, etc. They may have a list of sites in their database and are willing to match you with those sites. They may also assist you in finding a site for your franchisee outlet.
The franchisor will evaluate a site you have nominated, especially if it meets preliminary evaluation criteria. Because they will be incurring expenses evaluating a site, they may at this point require you to give a deposit or earnest money. In many cases, this is non-refundable.
4. Detailed Evaluation of Applicant
Simultaneous to the evaluation of a site is the evaluation of your suitability as a franchisee. For franchisors, this is actually more important than the suitability of your site. Even if your site may not be up to par with their standards, franchisors may decide that they like you as a franchisee and assign you to other sites they already have in their database. Because a franchise business is a long-term arrangement, franchisors will examine your credentials quite extensively. Educational background, available capital, professional experience, business affiliations, etc. will all be scrutinized.
What franchisors look for in franchisees vary. Some may want you to devote full time to the business while others may allow you to act as a passive investor only.
Due diligence is a two-way street. While the franchisor is checking up on you, do your background check on the franchisor also.
5. Follow up meeting(s)
Follow-up meetings to discuss your application will be scheduled as necessary. The franchisor may have detailed questions about your qualifications and your plans on running the business. You will be asked whether you will manage the outlet on a day-to-day basis or if you will be designating a representative to do so.
Questions about the location will also be discussed. Do you own the site? Or do you intend to lease or purchase it?
During this stage, you will also be given the Franchise Agreement so that you may review it in detail prior to signing. Use this time to go over the contract with a fine-tooth comb. It is also a good idea to avail of the services of a lawyer or a franchise consultant to advise you on the contract details.
Franchisors like maintaining consistency over their franchise agreements in order to promote uniformity; this makes it easy to enforce agreements across several franchisees. It is therefore difficult to negotiate franchise agreements to obtain more favorable terms for you, the franchisee. This is especially true of established franchisors. With first-time or new franchisors however, it is easier to negotiate terms because they are more willing to close the deal in order to get their franchise program up and running. You can also make a case that since their franchise program is still in its infancy, they will be making errors as they try to perfect their franchisee support program.
6. Franchise Awarding
If a franchise is like a marriage, the wedding day happens when both parties sign the Franchise Agreement.
At this stage, the franchisor has come to the conclusion that, not only have you met their requirements, you have a very good chance of succeeding as a franchisee. The franchisor has also evaluated your site and is confident that it is a good location for an outlet (in most instances, the franchisor has already come to this conclusion before they gave you a copy of the agreement for you to evaluate).
On your part, your evaluation of the franchisor, his business, and his franchise program has made you conclude that this is a business worth investing your money and, more importantly, your time.
As it is in marriages, once you sign the agreement, you are supposed to stick with your franchisor through thick and thin.
Time between processes differs from franchisor to franchisor. And, like I mentioned earlier, the sequence of processes may vary from franchisor to franchisor, but this is the general flow of the Franchise Sales process.
author: Manuel V. Siggaoat Jr., www.franlinkasia.com