IAM2674 – How the Franchise Disclosure Document Provides a Better Idea of Your Investment

Gresham Harkless opens this special episode, which is a “snippet of a snippet,” to provide insight and color into his new business venture. He introduces his journey into starting what is now called Blue Star Franchise, which will be supported by a subsite within CB Nation called Franchise CEO. The purpose of documenting this process, an idea he heard from the founder of the Franchise Brokers Association (FBA), is to be helpful for others. He believes seeing this journey would be super helpful not only for people thinking about starting franchises but also for anyone starting any type of business. He encourages every builder to continue to keep building, affirming that the world needs exactly what they are trying to build and that they should run their own unique race.

The Importance of Due Diligence and the FDD

Harkless reflects on his ongoing training, noting that on Day 347 of the franchise broker journey, a major topic that came up was the Franchise Disclosure Document (FDD). This federally backed document contains lots of information on every franchise. It gives candidates an idea of the required investment, the background of the management team, and earning projections. He emphasizes that the FDD is not just a document to quickly check a box and sign. It is something candidates must go through to do their due diligence and learn what is within it. He views this requirement for insight as what makes franchising more unique than other types of businesses.

The Most Valuable FDD Resource: Franchisees

Harkless stresses that as a person thinks about whether a franchise is a good fit, one of the most valuable parts of the FDD is actually the other franchisees. Being able to call and reach out to the people who have already invested is a “really big thing.” For larger brands, candidates will have a larger list and more people to speak to. However, if it's an emerging brand with fewer people, he advises having deep conversations to better understand what you are getting into. Emerging brands often haven't had the benefit of years of things not going well (like a franchisee not working out) to refine their process and system. He advises candidates to create time and space to go through the FDD and suggests getting legal representation to help answer any questions, which will ultimately put them in a better place.

Previous Episode: https://iamceo.co/iam2673-why-emerging-brands-are-the-next-big-opportunity/

• Blue Star Franchise: bluestarfranchise.com
• Browse the Franchise Inventory: bluestarfranchise.com/franchise
• Is franchising right for you? Check this out to see: bluestarfranchise.com/assessment
• Franchise CEO (A CBNation Site – coming soon) – franchiseceo.co

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Transcription:

Gresham Harkless 00:00
As you go through the process of thinking about a franchise business and thinking about whether or not it's a good fit or not a good fit, one of the most valuable parts of the franchise disclosure document is actually going to be the other franchisees. The people that have gone through, that have invested in being able to kind of call them and reach out to them and have those conversations ends up being like a really big thing. Obviously, the larger the brand, the larger number of people, the more people you have to speak to. But if it's more of an emerging brand, you'd have less people to speak to.

Hello, hello, hello, this is Gresh from the I Am CEO podcast. And this is a special episode, episode number 2287 of our I Am CEO podcast. And this is actually going to be a snippet of a snippet, so to speak. I'm just doing an intro because I've been starting to document my journey into starting what is now called Blue Star franchise. We're also going to do a kind of sub site within CB Nation called Franchise CEO. So you'll see some links in the show, notes related to that. But just wanted to give you a little bit more insight, give you a little bit more color in some of the aspects of why I'm actually doing this, because one of the things I was doing as I was going through training to start up this new business was realizing and hearing from the founder of fba, the Franchise Brokers association, that it'd be really cool to document your journey going through and building this out. I think it's something that would be super helpful, obviously for people that are looking for and thinking about starting franchises. But frankly, if you're starting anything, any type of business, I think it's really cool to kind of just even see the journey and how it's been going from there. So I'm going to share a few of those snippets from the. From the first couple of videos that have been created. But definitely, of course, subscribe to our YouTube. Check out a lot more where I figure out exactly where Herald Leonard Post is. So I'll have that information that's available to you. But regardless, if you're a builder, continue to keep building, continue to do your thing. The world definitely needs exactly what you're trying to build and needs you to be your unique self. So make sure to run your own race, because nobody can run your race like you. This is Grass signing out. I hope you have a phenomenal rest of the day.

Gresham Harkless 2:05
Just like that It´s day 347 of the franchise broker journey. And it's, it's been an interesting journey for sure. I think one of the big things that is, it actually came up just during the one to one I just had was around this ftd, the first franchise disclosure document. This document has lots and lots of information around every franchise, even you know, earning projections and any projections. I think that's the right, wrong way to probably put it. Just an idea of like what people have earned and that's usually portrayed in different ways depending on the brand. But typically because it's a federally backed document, you get an idea of that. You get an idea of like what your investment, you get an idea of the, the background of the management team. Just, just a lot more insight into what brand you're ultimately kind of invested in. I think when you have that opportunity.

To kind of like look at that holistically and go through that due diligence and understand a lot more of that, it's not just a, not just document that you go through and say, hey, I don't want to do this or let me just check out the box and sign and not look at it. Something you definitely want to do your due diligence and kind of learn about what is within. And that's a lot of what I do, you know, when I have those conversations, help out just to point out things for people to kind of look at, for candidates to look at as they're going through their journey. But I think that's what makes franchising a little bit more unique than other types of businesses and ways you can get into business. You have more insight there.

And with that being said, I mean as you go through the process of thinking about a franchise business and thinking about like whether or not it's a good fit or not a good fit, one of the most valuable parts of the franchise disclosure document is actually going to be the other franchisees. The people that have gone through that have invested in being able to kind of call them and reach out to them and have those conversations as it being like a really big thing. Obviously the larger the brand, larger number of people, the more people you have to speak to. But if it's more of an emerging brand, you're going to have less people to speak to. So that's where you really want to have deep conversations so that you understand more for what you're getting into. I think there's certain nuances where you have a system in business, but there's definitely things that you know, maybe need to be understood or explained a lot better. I definitely tell you that these emerging brands have not had the benefit of going through the years of things not going the way that they want to. A franchisee is maybe not working out, understanding why they didn't work out to refine the process, refine the system, refine the thing that you're doing. Those things happen as a result of experiences not going the way that you want them to go. So it's very interesting to kind of take that into account when you're thinking about it, looking into starting a franchise and starting a. Or investing in a franchise and looking into that to get a better idea and picture of, like, what you're doing. And I believe that that franchise disclosure document ultimately does that.

So that's one big thing. If you're thinking about investing into a franchise and thinking about putting your time and energy into that, make sure that you are going through that fdd. Create time and space to really go through that. You can also get legal representation to actually go through that and answer any questions as well, too. So when you set those things up, it's just gonna put you in a better place more than anything else.