Meeting the Franchisor - Maximize Your Benefits From Discovery Day
Whether it is a “Discovery Day” or other term that the franchisor uses, most franchisors require prospective franchisees to visit their corporate headquarters as a pre-requisite to buying a franchise.
Although, some franchisors try to schedule the corporate visit at an early stage in the franchising process, the franchise candidate should attend Discovery Day after:
- Speaking to several franchisees
- Having reviewed the Franchise Disclosure Document (FDD)
- They have gained a good understanding of the franchise program.
A word of advice: some franchisors will not provide a copy of the FDD to a prospective franchisee until the candidate visits the Franchisor’s headquarters. I believe that once a franchisee completes and submits the application to the Franchisor and is approved, the Franchisor should be willing to forward the candidate a copy of the FDD.
Each party should have objectives they wish to achieve as a result of Discovery Day:
- Meet the franchisee candidate face to face.
- Review the qualifications and make a collective decision regarding the candidate as a future franchisee.
- Present the franchisor program and key staff to the candidate.
- Resolve any open items or questions on the part of the candidate.
- “Close” the franchise transaction.
- To observe, recognize and understand the franchisor’s corporate culture.
- To obtain answers to any remaining questions.
- To ask questions raised from franchisee interviews.
- To negotiate any open items pertaining to the franchise agreement.
- To gain feedback from franchisor staff regarding the individual franchisee's business plan and strategy.
Typically, the franchisor will have a set agenda or format that is used for Discovery Day visits. Be sure to request a copy of the agenda before your meeting. It should include a list of those individuals who you’ll be dealing with as a franchisee.
From a functional standpoint you want to meet those people:
- Who furnish training and support services to the franchisees.
- Who are responsible for marketing and sales promotional activities.
- The franchisor senior management or founder.
This visit is very important, since it usually comes near the end of the franchising process. It may be the last chance you’ll have to obtain answers to important questions before you decide to sign the franchise agreement and pay the fee. Based upon the results of your interviewing franchisees and the review of the FDD, you should have specific questions for the franchisor staff. From the franchisor’s perspective, recognize that the franchisor staff is going to make a decision as to whether they feel you are qualified to be a franchisee.
Hopefully, you have been able to have a positive visit with the franchisor and have resolved the questionable items, with the result that you will sign what you and your attorney feel is an equitable franchise agreement. It is important that you utilize legal counsel to advise you in this final step because once you sign the franchise agreement you put your name and money “on the line.” Do you feel, based upon all of the information you’ve gathered, that they will “deliver as promised?” This is the question you should be able to answer at the end of Discovery Day.
About the Author: Ed Teixeira has over 35 years of franchise industry experience as a franchise executive and franchisee. He has served as a franchise executive in the c-store, manufacturing and home healthcare industries and has licensed franchises in Asia, Europe and South America. He has spoken on the subject of franchising throughout the world. Ed operates FranchiseKnowHow which provides information and advice to prospective and existing franchisees and franchisors.
Know Before you Go – Non-Compete Provisions in Franchise Agreements
In general, non-compete provisions state that the franchisee will not, during the term of the franchise agreement and for a reasonable period thereafter (typically two or three years), own or be involved in any “competitive business.” What constitutes a “competitive business” will vary from franchise system to franchise system, but most franchisees can generally expect to be prohibited from taking part in any business that offers goods/services that are either identical to or competitive with the goods/services offered under the franchise system. Non-compete provisions must be limited in geographic scope, and generally cover a set radius (usually somewhere around 5 to 25 miles) around the former franchised outlet, and possibly also the outlets of other existing franchisees.
Franchise Fridays for July 22, 2011: Top Franchise and Small Business News of the Week
Tennis Legend Caught Juicin'
Best Practices in Protecting and Enforcing Trademarks, Copyrights and other IP
Trademarks, copyrighted works, trade secrets and proprietary business information form the core of any franchise system, and are frequently a company’s most valuable assets. Trademarks, including service marks, logos, slogans and trade dress, define the brand identity as presented to the public. The “behind the scenes” business know-how on which the system is built and implemented by franchisees is embodied in a variety of copyrighted and proprietary works – operations manuals, proprietary processes, recipes and formulas, custom software, advertising copy to name a few.