A franchise application is a questionnaire filled out in order to begin the process of opening a franchise. The questionnaire provides information about the applicant that will be used by the parent company to determine whether the applicant is a good candidate for owning and running a franchise. If the company feels that the application is strong, it will request an interview. Ultimately, the applicant will have to provide financial documentation and other materials to show that he is ready to run a franchise, and will need to pay a licensing fee to the parent company to open the franchise itself.
In a typical franchise application, the names of all the applicants are included. The form asks applicants about their financial situations, familiarity with the brand and products, and level of experience with operating similar types of businesses. A strong application will show partners who have or can access financing and are familiar with the industry. People applying for a restaurant franchise, for example, would ideally include at least one applicant who has managed a restaurant of a similar type.
Startup fees for opening a franchise can be high. In addition to the licensing fee, people also need to buy or rent real estate and pay for other starting costs. These can be too much for some applicants to bear unless they have access to lines of credit or finance partners. The return on investment can also take time to develop, although the advantage to opening a franchise is the ability to use a known, recognized, and liked brand and associated promotional materials.
The franchise application will provide people with legal disclosures including a discussion of average startup costs, the policies of the parent company, and an outline of the franchise fee and the royalties that will need to be paid to the parent company. It is important to read these disclosures carefully in order to understand the terms of the franchising agreement. If the franchise violates one of these terms, the parent company can have grounds for suit.
Information in the initial franchise application is carefully reviewed. If the company feels that the applicant is not suitable, a letter of rejection will be sent, usually with an explanation that details the problems with the franchise application. This information can be used to reapply in the future if the problems can be rectified. For example, if the applicants do not appear financially stable enough, finding another applicant or source of financing can reassure the parent company that the franchise is feasible for the applicants.