Discovery Day

11 03, 2019

Q&A: Jessica Melendez on vetting franchisors

2019-03-12T10:55:11+00:00March 11th, 2019|Tags: , , , , , , , |

Woman on Phone

Q & A

Jessica Melendez on vetting franchisors

What are some important questions for a candidate to ask a franchisor?

Working as a broker, I put together a template of questions for my candidates to use when talking to franchisors. During the discovery process, most of those questions are answered, and my clients can check them off their lists. However, I insist that they get clear, in-depth answers on the following questions.

Regarding Training

  • What does your training program look like? What ongoing training do you offer?
  • Do you provide a mentor? For how long?
  • Do you assist in training my team?

Regarding Territory

  • What is my protected territory and how is it defined?
  • How many franchises have been awarded in my state? Have they all opened? If they haven’t, why not?
  • What are your plans to develop my state and how will that impact my franchise?

Regarding Cost

  • Can you give me a break down of all of the expenses associated with getting started?
  • How much additional capital will I need after I launch my franchise?
  • What goods or services do I have to purchase directly from you, the franchisor, and can I competitively shop for a better deal?
  • Is there a national advertising/marketing fund that I must contribute to?

Regarding Potential Earnings

  • What can I expect to earn if I join your franchise system, and does your franchise disclose this amount in your written materials?
  • Do you provide a pro-forma?
  • What is your average profit margin?
  • What is your average sales per month?

Regarding Franchisee History

  • How many franchisees have you added in the past year? How many have you lost?
  • How many franchised units have failed and why?
  • How have previous franchisee/franchisor disputes been settled?

What are some red flags to look out for?

  • Corporate takeovers: Pay close attention to item 20 of the FDD, which will give you information on the number of franchises transferred, canceled, or terminated; as well as the number of franchises that have not been renewed by the franchisor or have been reacquired by the franchisor. Corporate takeovers or terminations are red flags—possibly indicating there are failures due to training and support or infrastructure.
  • Resales: Are resales being sold at their prime for big profit? Or, are they selling to unload their business due to losses or no growth?
  • Unhappy franchisees: Another red flag would be several unhappy franchisees during validation calls. If you’re making validation calls and discover several unhappy validators, talk to the franchisor and see how he responds. Are they weak owners, or is the franchisor failing them?

How should you prepare for a Discovery Day?

Going through the buying process in its entirety is the best way to prepare for Discovery Day. By the time it arrives, you should have made your validation calls, reviewed the FDD to completion, had calls with the franchisor, and reviewed all materials/webinars provided. Discovery Day should be the day you meet the executive staff and see how they operate firsthand. At this point, you want to see if the brand and culture are a fit for you.

Discovery Day is also a good time to ask final questions regarding the FDD or validations, discuss attorney review and offerings, finalize territory maps, and ask about next steps. Take care of the following before you arrive to make your trip more efficient:

  • Confirm travel arrangements.
  • Arrive a day early, as most Discovery Days start first thing in the morning.
  • Ask about dress code—some franchisors prefer business casual.
  • Ask for an agenda.
  • Ask if you need to bring anything with you, such as financial information.
  • Prepare a list of final questions.

Jessica Melendez

A trainer and mentor for FranServe, Inc., the world’s largest franchise consulting firm, and the CEO of WestStar Franchise Group, Jessica Melendez coaches and educates prospective franchise owners and helps them find businesses that align with their personal and professional ambitions. As a franchisor and president of Dryer Vent Squad, Melendez has first-hand experience in all aspects of franchising, which makes her an excellent resource for prospective franchisees. Contact Melendez at 915-202-8272, email, or visit

1 12, 2018

Two-Way Streets

2019-03-12T10:51:55+00:00December 1st, 2018|Tags: , , , , , |

Young Professionals

Two-Way Streets

Franchisors want to know that potential franchisees are a good fit

By Paul Segreto

Recently, a group of people inquired about a franchise opportunity with a fast-growing, emerging brand my firm had been representing for the past year. The candidates were financially qualified for several locations. We had multiple calls, including an FDD review, and on every call the group’s focus was on location and getting started ASAP.

Despite their aggressive nature, we kept them on course and guided them through the process. During Discovery Day, they met the brand’s founders for the first time. Here’s where things went south. The five candidates kept themselves busy talking to each other. They spent their time scribbling notes, running numbers, talking about location, all amongst themselves. They made no effort to speak with the founders, ask them questions, or interact at all. They merely told the founders how they should change this or revise that—and how they’d like to do so when they opened their business.

Seeing how quickly this meeting was going off course, we tried to create interaction between the parties. The founders worked hard to engage with the candidates, asking questions, trying to determine if there was a fit. When a founder asked the group, “Why this brand? What do you like about it?” The response was cool: “We know we can make money and when we do, we’ll commit to other locations.”

A day later, the group had signed a letter of intent on a location, procured a cashier’s check for the franchise fee, and they were ready to sign the franchise agreement that very day. The franchisors, however, weren’t interested. They didn’t believe these individuals would follow the processes and procedures the founders had meticulously developed and invested in for more than eight years. The founders knew their system was working quite well, as evidenced by high customer satisfaction and great unit economics including excellent profit margins. Long story short: They rejected the candidates.

This scenario isn’t uncommon—in fact, it’s unfolding more and more as franchisors are focusing on finding the right candidates for their franchises. Processes have evolved from applications and financial qualifications to evaluations of whether candidates are right for the franchise system and with where the system is today. Want to own a franchise? Start by working on your relationship with the franchisor.


A statement frequently heard is the franchise relationship is interdependent—the franchisor and the franchisee are dependent upon each other. Your success is our success, and our success is your success. Franchisors are emphasizing strong foundational components of relationships built on open, two-way communication, as opposed to the old cliché, “You’re in business for yourself, but not by yourself.” Many believe the franchise relationship is like a marriage, complete with a courtship before the I do’s.

Candidates are known to push through the process entirely focused on whether the opportunities are right for them. They give little to no thought about the franchisor’s perspective. Many believe the franchisees are the only ones making big commitments in ‘buying’ the franchise. They think the franchisor should be grateful, never giving thought to what that franchisor brings to the table.

Franchisors want to know that their franchisees are good fits for the brand—and for them, too. That’s where my group of candidates went wrong. The founders passed on their application because they believed the values they worked so hard to build throughout the brand—the ones their franchisees instilled every day—would ultimately be missing under this group’s management.

Had they tried to demonstrate that they were team players and interested in a relationship that worked both ways, the outcome could have been different. Learn from their mistake: A little genuine interest in the franchisors—along with the brand—could be the most important step toward sealing the deal.

Paul Segreto is a recognized entrepreneur, franchise and small business professional. His expertise includes startups and turnarounds, strategic planning, business and franchise development, branding, social media and digital marketing with primary focus on restaurants and service-driven businesses.

Segreto founded Franchise Today podcast in 2009 and Franchising & You podcast in 2018. He is CEO of the Franchise Foundry. Contact Segreto at Contact Segreto at