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Why Are Financial Performance Representations Important?

Guest post by: Anne Barr

Article Overview: This article generally explains why financial performance representations (formerly known as earnings claims) are important for a franchise to have.

Why Are Financial Performance Representations Important?

Financial Performance Representations (FPR’s) formerly known as “earnings claims” are important for a couple of reasons.

First and foremost, FPR’s provide prospective franchisees with an answer to the most common question “How much can I make.” This is critical information particularly for attracting experienced multi-unit franchisees. Multi-unit prospects want to have performance data and then they are willing to speak with other franchisees.

Secondly, especially in today’s business climate, FPR’s are more important than ever to lenders. Better information is required by most lenders before making a decision. Many lenders are smaller community banks, as well as non-traditional sources and may not be familiar with the different franchise brands and their unit performance. Lenders are asking for information in order to properly identify and assess the risks.

Many franchisors are changing their position about FPR’s. Most franchisors feel it is a positive to have FPR’s however, others still feel it does not provide adequate data, it will cost too much to gather the data, their attorneys advise them against it, or they are just negative on the idea.

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Article Tags: franchise financial performance, franchise opportunity



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