The Franchise Validation Process

By Michael H. Seid, Joyce Mazero

Your franchisees should prove to you that they can keep their commitments to the system after they become a franchisee. At the same time, you are trying to convince them that your system is the right opportunity for them. The best way to accomplish that is to give prospects assignments and dates they need to meet to get it to you. Hold them to those dates. Some of the tasks you can give them during the process include the following:

  • Completing the preliminary and more in-depth application on time
  • Returning the FDD receipt page
  • Meeting with their legal, financial, and other advisors
  • Applying for financing from their bank
  • Looking for locations
  • Researching the demographics of their desired markets, as well as any state or local laws and regulations that may impact their business
  • Visiting some of your locations
  • Coming to Discovery Day
  • Talking to your current and former franchisees

In Item 20 of your FDD is a list of your current franchisees and those who have left the system along with their contact information. Have your prospects contact your current and past franchisees so that they can get comfortable with your franchise system and begin to understand what being a franchisee is all about. This process allows them to ask about your capabilities as a franchisor and also to get answers from franchisees about the financial performance of individual operations that you may not be able to answer.

Although you should not steer your recruits to your most favored franchisees or those who like you the best, you can assist them by matching them up with franchisees in similar markets or to franchisees who share similar profiles. Who the prospects call is their choice, and you should let them know that. Have them give you a list of which franchisees they are likely to call so you can alert those franchisees to expect a call. This will facilitate your current franchisees in giving the prospect information about the system, but refrain from telling the franchisee what to say or what not to say.

Make sure you call each franchisee that the prospect has called so you can get feedback on the prospect. You also want to hear the types of questions the prospect is asking, which will give you a good indication of how serious they are about your opportunity and what their doubts or concerns may be.

Follow up with prospects on the calls they’re making to ensure they’re getting the information they need. Address any issues or concerns that may have surfaced during their due diligence. The recruiting process is a two-way street, and making sure your prospective franchisees are comfortable with your system is as important as you being comfortable with them.

When a potential franchisee checks in with your existing franchisees, you can also get incredibly important feedback on your performance as a franchisor. What will your current franchisees tell a prospect about you? Hopefully, you’ve lived up to the promises you made to your franchisees so that you get the positive validation necessary to convince prospective franchisees that your system is right for them. If not, make it a priority for you to do better.

Some franchisors will pay a commission or provide some form of monetary reward to franchisees that participate in the recruitment process. Take care if you choose to do so and discuss this carefully with your consultant and attorney. Paying money or providing other material rewards to your franchisees could technically turn them into a broker or sales agent.

Many franchisors use a validation service that independently contacts your franchisees and scores your system.