Issues of Earning Claims for Franchisors and Franchisees (Part B)

Conducting Your Own Research

To research the earning potential of a franchise opportunity, a potential franchisee may do some investigative work. For example, Item 20 of the FDD should contain the names, addresses, and phone numbers of existing franchisees. With this information, a potential investor may contact franchisees who operate within their potential territory, and ask to discuss financial matters related to the business.

When speaking with existing franchisees, a potential investor should ask questions such as:

• Do you have a good relationship with the franchisor?;
• What is the state of the business's cash flow?;
• What is the business's sales vs. expenses ratio; and
• What is the franchisee's level of satisfaction with the franchisor?

Once you have gathered this information, you can have an accountant assist you with projections and estimations, and then consider the possibilities for operating profits. This will help you get an idea of a franchise's earning potential.

If False Information Is Provided

If you have invested in a franchise in New York, and you feel that you were mislead by a franchise's earning potential claims, you may have a case for legal recourse. For example, in the case of the Make and Take Gourmet franchise, three franchisees filed suit against the franchisor. In the lawsuit, the franchisee's claimed that the franchisor mislead them with information regarding their earning potential.

The suit claimed that information on earnings was "false and misleading" and was meant to "induce" the franchisees to invest in Make and Take Gourmet. In the case, the lawsuit claimed damages of $2 million for each of the franchisees. If you have been similarly misled by a franchisor in New York, you should immediately get the help of a New York franchise lawyer.

Getting the Help of a New York Franchise Lawyer

If you are a franchisor in New York, you should have a New York franchise lawyer review your information before you provide financial information to potential franchisees. This may help prevent disputes and other issues.

On the other hand, if you are a franchisee in New York, and you feel that you have been misled by a franchise's earning potential, a New York franchise lawyer may help you pursue financial damages.

Contacting a New York Franchise Lawyer

If you are an entrepreneur who is interested in franchising your business there is a lot you need to know, including the significance of evaluating your trademark and how to approach the preparation of your FDD. For a limited time, get New York franchise lawyer Charles N. Internicola, Esq's franchise law report to determine whether or not your business is right for franchising. Contact us today at 1-800-976-4904 for more information about Mr. Internicola's franchise law services in New York and how he assists entrepreneurs franchise their business nationwide.

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