Getting Financial Information from a Franchisor
As a potential franchisee, you will be provided with specific disclosures in a Franchise Disclosure Document (FDD). This document will include certain financial information about a franchise. You may use this information to make projections about a franchise opportunity, and decide whether to invest in a franchise.
However, the financial information in the FDD may be insufficient. In fact, a franchise’s earnings are not required within the FDD. Only about 25% of franchisors provide information about their earning potential. This is because oftentimes, earnings information may reveal some unattractive numbers.
If you want to receive earnings projections when considering this type of investment, you can ask the franchisor to provide an earning claims statement. If you do request an earning claims statement, try to get a statement from a franchise in your projected area. This will give you an idea of how these costs and considerations relate to your geographic area.
If you do receive an earning claims statement from a franchisor, you can have the statement reviewed by a franchise lawyer who can run the numbers you’ve been given and help you make an informed decision about investing in a franchise.
If you are an entrepreneur who is interested in buying a franchise, contact us today at 1-800-976-4904.
By Charles Internicola December 31, 2010
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