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How Much Should I Tell Potential Franchisees About Costs At A Franchise Trade Show?

Well first and foremost you must absolutely ensure that whatever information that you discuss and provide to prospective franchisees is disclosed in your FDD. The disclosure and information that Franchisors may provide to prospects is limited to the FDD. So if your FDD does not include financial performance representations then you cannot talk to prospects about their potential revenues. Likewise cost estimates must be limited to the estimated initial investment set forth in your FDD.

One of the most common questions franchisees will ask during a franchise trade show is what it will cost them to invest in your opportunity. Cost is in most cases the No. 1 factor in whether or not a franchisee is interested in learning more about your franchise.

When a potential franchisee at a franchise trade show asks about the costs associated with starting a franchise you should be careful to disclose accurate estimates for all figures. Don't try to mask costs or omit requirements as these may violate franchise laws at both federal and state level, in addition to setting yourself and the potential franchisee up for disappointment. You can only disclose the information contained and disclosed in your FDD as to the "Estimated Initial Investment".

Franchisees are at a franchise trade show to seek an investment from which they can profit. The franchisee will most likely inquire about their own earnings potential with your franchise, and again you need to make sure that the only information you provide is the information contained in your FDD. If you dont have a financial performance representation you cannot talk about potential earnings and even if your FDD makes a financial performance representation your "discussion" must be limited to what has been disclosed in the FDD.

Charles Internicola

by Charles Internicola
National Business and Franchise Lawyer

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