Franchise Sales Due Diligence

Franchising is an excellent way to expand a business while minimizing risk, and it is no wonder why so many companies choose to franchise their brand. However, for franchise sales staff, it is essential to know how to correctly discuss and present the franchise opportunity.

We refer to this as Franchise Sales Due Diligence. It is a process that we believe complements the franchise candidate’s due diligence. Basically, it’s closing the loop on due diligence, the first true step toward developing an interdependent relationship between Franchisor and Franchisee. To that end, here are several key points franchise sales staff must keep in mind when in discussions with interested individuals:

  • It is imperative to be fully transparent and honest about the initial costs and time requirements involved in starting a franchise. This includes discussing the initial franchise fee, ongoing royalties, and any other fees that may be required. Being transparent about the costs involved from build-out to grand opening marketing to the amount of working capital needed, will help potential franchisees make an informed decision about whether the opportunity is right for them, and if it is, whether a partner may be needed. Also, time requirements through site selection and up to and through grand opening including the time commitment necessary (including time away from work) for training must be fully understood.
  • It is important to understand the goals and aspirations of potential franchisees. This includes understanding their financial goals, personal goals, and career aspirations. Understanding what the franchisee hopes to achieve by owning a franchise will help the franchise sales staff match the individual with the right opportunity whether as a single-unit or multi-unit franchisee, or area developer. Consideration must also be given to whether the potential franchisee will be able to commit full-time to the endeavor or will have a manager, partner or family member operate the business.
  • It is necessary to know or learn about the local market where the potential franchisee is interested in opening his or her franchise business. This includes an understanding of the competition, the local economy, population trends, and any local laws or regulations that may affect the business. Knowing all that can be learned about the local market is important in helping the franchise sales staff determine whether the franchise will be successful in that market and whether the development of additional franchise locations will be possible.
  • It is crucial to explain what the franchisor expects of its franchisees and what franchisees should expect from the franchisor. This includes a frank discussion about responsibilities and obligations, and how working together in an interdependent relationship will be instrumental toward the success of the franchisee’s business and that of the brand. Serious consideration must be given as to whether the relationship is a right fit for all parties to the franchise agreement.

Now that it’s understood what franchise sales staff must keep in mind when working with interested parties and discussing the franchise opportunity, extensive knowledge about the brand is equally important. Listed below are several additional points for franchise development staff:

  • Franchise sales staff must have a comprehensive understanding of all items within the franchise disclosure document. The FDD is a legal document that contains essential information about the franchise system, including the franchisor’s financial statements, litigation history, and franchisee obligations. Franchise sales staff should be able to explain each item in the FDD in detail and answer any questions that prospective franchisees may have.
  • Franchise sales staff must fully comprehend Item 19 of the Franchise Disclosure Document (FDD). Item 19 is the financial performance representation section of the FDD, which outlines the financial performance of the franchise system. Prospective franchisees rely on this information to make informed investment decisions. Franchise sales staff should be able to explain the financial performance data in Item 19 in detail, including any assumptions or limitations.
  • Franchise sales staff must have thorough knowledge of the franchise system’s business model, including how franchisees make money. Prospective franchisees want to know that they are investing in a system that has a proven business model that can generate revenue AND profits. Franchise sales staff should be able to explain the key drivers of revenue and profitability for the franchise system, as well as the potential pitfalls that may hinder profitability.
  • Franchise sales staff must have a deep understanding of the particulars of the franchise system. This includes the supply chain, marketing, social media, and training and support. These are all critical components of the franchise system that can impact the success of its franchisees. Franchise sales staff should be able to explain how each of these components works and how they support the success of each franchisee individually, as a group within a local market or region, and all together as a brand.

It is essential for franchise sales staff to have full understanding, comprehension, and knowledge of all details and aspects of the franchise system. Whether about the business model or financial performance representation or any particulars of the franchise disclosure document, franchise sales staff must also possess the ability to explain and answer any questions about the brand and the franchise opportunity, and with full transparency.

At the end of the day, franchise sales staff play a critical role in the success of the franchisee and ultimately, the franchise system. By committing to the various points listed above, franchise sales staff can set the stage for stronger franchise relationships while contributing to the likelihood of success for the brand.

Make it a great day. Make it happen. Make it count!

Resources & Support

The future may be a bit bumpy for some franchise brands, more so for others. Knowing who to turn to and when to turn to for guidance and help is important for franchise leaders and key team members alike. Having resources at their disposal is also important.

So, if challenges are apparent or if trouble is on the horizon, or for whatever the situation, please feel free to reach out to us for assistance or even if you just need someone to talk to. Please do not hesitate. You can reach us via a LinkedIn message, by email to, and by phone or text at (832) 797-9851.

Learn more about Acceler8Success Group at Also, check out two of our other resource & support sites at and