Franchise Lawyer Blog

Discovery Day

Know What to Expect At Corporate Headquarters

When a franchise relationship is a good fit, it can bear fruit for both the franchisor and the franchisee. Ensuring that everyone is on the same page is an involved process, however, and both franchisees and franchisors must do their due diligence before a profitable agreement can be struck.

A primary way franchisees and franchisors can get to know each other is through a franchise “Discovery Day.” On Discovery Day, potential franchisees travel to corporate headquarters to meet the franchise team. Individuals can get the most out of Discovery Day by doing their homework and building an understanding of both the advantages and limitations of a Discovery Day format.

Prepping Essential Before Discovery Day

Not everybody gets an invite to a Discovery Day. Potential franchisees typically must qualify financially and have successfully passed through earlier stages of the franchise exploration process. For instance, most candidates go through a credit history check, a background check and an evaluation of their understanding of the franchise’s business. Many have submitted an application on the franchisor’s website.

If franchisee candidates do get invited to a Discovery Day, attendance is recommended only if they are very serious about buying into the franchise. By the Discovery Day, potential franchisees should have a substantial amount of research under their belt, as well as a solid understanding of how the business operates. They should also have a franchise attorney available; they will want an attorney to look over the franchise agreement and franchise disclosure document as soon as possible.

In New York, the franchisee should receive a franchise disclosure document (FDD) at Discovery Date. New York requires an FDD be provided at the first personal meeting. Under the FTC rule, the FDD is not a mandatory part of a first meeting. A savvy prospect will strongly request one.

When Discovery Day comes, potential franchisees will see the entire operation in action. Discovery Days usually include a tour of the main facility, meetings with corporate officers and visits to a franchise operation or two near the corporate headquarters.

Franchisee candidates may notice a difference in the tone of franchise development representatives on Discovery Day. Reps may begin to seem more like salesmen. Individuals should take the pitch with a grain of salt; there is much to be learned from a Discovery Day. However, franchisors are very careful to present an impressive image on Discovery Day so franchisees are encouraged to remain skeptical. Discovery Day can augment your knowledge of a business, but it is certainly no substitute for a thorough review of  the franchise disclosure documents.

Individuals considering the franchise option may have business knowhow and may like the look of a franchise operation, but they should always retain an attorney to conduct a thorough review of the franchise agreement before they sign anything.

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