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Franchise Financial Information

Written by: Sebastien Page

Article Overview: As dictated by the Federal Trade Commission (FTC), franchisors are required to give prospective franchisees a copy of their Uniform Offering Circular (UFOC) document, which contains financial and material information about the franchisor.

Franchise Financial Information

As dictated by the Federal Trade Commission (FTC), franchisors are required to give prospective franchisees a copy of their Uniform Offering Circular (UFOC) document, which contains financial and material information about the franchisor. The Franchise Agreement is an important part of the UFOC and an integral part in the franchise selection process, as it discloses the good and bad about a company. You should probably seek assistance from an accountant or another professional when reviewing financial information. Though having a professional check out your UFOC / Financial Statements / Franchise Agreement may cost anywhere from a few hundred to a few thousand dollars, but, considering the substantial financial investment you’re going to make, this little consulting investment will definitely pay off.

There are a number of things you can do to verify the information in the UFOC document as well as uncover potential red flags. The government does not review UFOCs to ensure their accuracy; it only requires that franchisors provide it to prospective franchisees – meaning that you absolutely must substantiate the UFOC’s financial statements.

Usually, franchisors don’t make straight-forward earnings claims; rather, they supply information from which you as the prospective franchisee can calculate gross sales. Consider contacting existing franchisees to find out their earnings if you’d like to substantiate earnings claims.
When reviewing the UFOC, consider: does it reveal any unusual risks taken by the franchisor? How’s the franchisor’s litigation record? How are the franchise outlets performing? How well are the company’s intellectual rights protected? If the company’s intellectual rights aren’t properly protected, other businesses could copy your name or logo and/or open up shop in your area, which means that they may take away your business and profit from what should have been your name recognition.

Related Articles
  How to Finance Your Franchise Business Opportunity
  Visiting a Franchise Show is a great way to investigate franchise opportunities.
  Franchise information that is pertinent to your investigation is disclosed in the Uniform Franchise Offering Circular (UFOC).
  Why Use a Franchise Consultant?
  Why Franchisees Should Consider Using a Franchise Broker

Article Tags: accountant, federal trade commission, financial information, financial statements, franchise agreement, franchise outlets, franchisor, franchisors, ftc, gross sales, intellectual rights, litigation, professional check, prospective franchisee, prospective franchisees, red flags, selection process, substantial financial investment, thousand dollars, ufoc



Related Forum Posts
Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.
Future Financial Corporation - I've never heard of Future Financial Corporation is this a new company?


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