You Asked, We Answered: How to Actually Diligence a Franchise

Hey there,

Welcome back to the Franzy Five. Big week in the industry and a bigger one inside our four walls.

This week: California fines Dickey's for hiding how many franchisees actually failed, we preview next week's franchise webinar with advisor Caleb Clayton, we spotlight the outdoor-living brand that just joined the Empower Brands platform on Franzy, we break down the stat showing just how much of the restaurant resale market has shifted to franchise deals, we sit down with a franchisee who spent 15 years refusing to force growth at his family's pizza company, and we answer a reader's question about what actually matters when you diligence an FDD.

California Just Called Out Dickey's for Hiding How Many Franchisees Failed

Next Week's Webinar: The Franzy Process, From First Call to Close

Our free franchise webinar series continues next week with a session led by Caleb Clayton, one of our senior franchise advisors, called The Franzy Process: From First Call to Close. Caleb has spent more than 14 years in franchising, including leading development efforts for seven national brands, helping award more than 1,200 territories, and six years as a franchise owner himself before a successful exit.

He'll walk through what actually happens between a candidate's first call with Franzy and the day they sign, and what separates a genuine fit from a forced one. Caleb built his reputation on straightforward answers, even when they aren't what someone expected to hear, and his job is to help people figure out whether franchise ownership is right for them at all.

You can register for the live session here.

Archadeck Outdoor Living

The brand that invented the modern outdoor living category, one custom deck and patio at a time.

Archadeck got its start in Richmond, Virginia in 1980, built on a simple idea: bring real architectural design to backyards instead of the cookie-cutter decks that dominated the market at the time. The company began franchising a few years later and has since completed more than 200,000 outdoor living projects across the country.

Franchisees design and build custom decks, patios, screened porches, sunrooms, pergolas, and outdoor kitchens, appealing to homeowners who want a space built around how they actually live rather than something off a template. This week Archadeck went live on Franzy as part of the eight-brand Empower Brands platform launch, alongside Bumble Roofing, Koala Insulation, and five other home-services concepts.

With 112 units nationwide and average gross sales north of $2 million, Archadeck is one of the more established, higher-revenue brands in this week's Empower launch, and a good look at what a mature outdoor-living franchise can look like on paper.

That is how much of all restaurant resale closings in the second quarter were franchise deals, up from 28% in the first quarter, according to a new report from We Sell Restaurants. Buyers taking over an existing space are increasingly picking proven systems over independent concepts.

The Franchisee Who Refused to Force Growth

Our latest episode of The Exit Plan features Taylor Johns, who took over his family's pizza company, Karolina Enterprises, in his mid-20s. Rather than rush to expand, he sat at 16 stores for 15 years on purpose, hiring two to three years ahead of where the business actually stood.

He explains why he tracks headcount instead of food cost or labor, and what changed once he started calling neighboring franchisees instead of figuring it out alone.

What Are the Most Important Things to Diligence in an FDD?

One reader's question, answered by our advisory team.

The question. A reader asked: what are the most important things to diligence in an FDD, whether that's the legal terms and rights or the numbers?

Watch the closures, not the transfers. Mature systems turn over 10 to 15% of their units a year as owners build to sell. That's normal. What's not normal is closures happening before a franchisee's term is even up. Fast growth deserves scrutiny too. A brand that grew 300% in a year isn't exciting on its own, it can be a sign the system has outgrown its own support.

Cross-reference before you trust a number. Item 7 gives you the investment. Item 19 gives you the performance picture, if the brand has one to show. The move most people skip is checking Item 19 against Item 20, which shows additions, closures, and transfers, so you can see why the Item 19 sample might be smaller than the total unit count. Treat Item 19 as a sales tool, not gospel. It gets you to an assumption. Talking to current franchisees gets you to the truth. It's also worth comparing the territory in Item 12 against where the Item 19 locations actually operate. If a disclosed location serves a population of 1.2 million and your offered territory covers 350,000, you'd need three or four territories to make a fair comparison.

A couple other stories worth your time this week.

Reply if any of these caught your eye. We read everything.

- Alex

Franzy is the modern way to find and own a franchise.
Charlotte, NC