A franchise discovery day, or similar event, is an opportunity for prospective franchisees to learn about the franchise from the franchisor firsthand. Attending a franchise discovery day is a key way for franchisees to gather a lot of helpful information in a short period of time.
What is a Franchise Discovery Day?
At a typical franchise discovery day, a prospect—who has usually already received a franchise disclosure document (FDD) and has passed some preliminary thresholds—visits the franchisor’s headquarters and tours various departments and meets with personnel of the franchisor who interface with franchisees. Franchise discovery day is an opportunity for a prospective franchisee to ask questions and observe the franchisor firsthand.
What Should I Expect on Discovery Day?
For the franchisor, discovery day is a sales presentation and thus there is a natural tendency to make it a “feel good” experience. As a franchisee, you should not be afraid to ask difficult questions or to get clarification. If you are wondering what types of questions to ask at your franchise discovery day, and are looking for tips, we have outlined a list for you to consider before attending your discovery day.
How Do I Prepare for Discovery Day?
The questions below are not legal advice, but are based upon observations over years of experience. In general, you should try to gather as much information about the franchisor as you can before going to your franchise discovery day.
Tips for having a successful franchise discovery day include reviewing the FDD, talking to your lawyer, accountant and business advisers, and speaking to a number of existing franchisees (for whom you can find contact information in an exhibit to the FDD).
Obviously, if you do not receive the FDD until you go to your franchise discovery day, you will not be able to do this fully, but you still should ask as many questions as you can. If you do not get the FDD until discovery day, you should make sure that you have an opportunity, later, to ask the franchisor questions, after you have reviewed it and gathered other information.
Following our tips for discovery day, and asking the questions presented below, will go a long way in helping you forge a successful path forward as a franchisee.
How Do I Get the Most out of a Franchise Discovery Day?
The FDD will contain a list of franchisees who have left the system. You should try to speak with some of those franchisees and establish why they left the system or were terminated. Then you should ask the franchisor for its side of the story with respect to former franchisees. Former franchisees can sometimes be a source of important information, particularly if it is negative information about the franchisor. On the other hand, some former franchisees simply did not comply with the franchise agreement or may not have worked at the franchise and therefore are not likely to give you useful insights.
If the franchisor is a large, national company, you might be concerned about whether it has saturated the market and the extent to which there is room for growth. If it is a regional or local company, be wary of plans to expand rapidly. Another area of concern in this regard is whether the franchisor is considering selling out to another company or acquiring another company.
If not, why?
Franchisors often have “franchise advisory councils” that are the franchisor’s chosen representatives to connect with franchisees. Franchisor advisory councils are not independent of the franchisor. Nonetheless, they give the appearance of franchisee input into the system. An independent franchise association, by contrast, is a truly independent organization in which franchisees are free to develop their own positions and thoughts. Sometimes, franchisors do not recognize independent franchisee associations, and take the position that franchise advisory councils are the appropriate way to communicate with franchisees.
If the franchisor does not recognize an independent franchisee association, you should find out why from the franchisor, and then you should speak with someone from the association (which must be disclosed in the FDD) about his or her point of view on the subject.
What is the way that the franchisor deals with franchisee complaints?
If so, how many? Why?
Beyond providing questions and tips for your franchise discovery day, the franchise attorneys at Garner, Ginsburg & Johnsen P.A. are able to provide expert assistance in all franchise-related matters, including buying a franchise and breach of contract. Contact us if you’re in need of a franchise lawyer.