In my over three decades experience as a franchise consultant, I am often asked “When franchising your business, what are some of the most important considerations?” Here, I will examine one of those issues: when franchising your business, the special circumstances that may convince you to disseminate financial performance representations (FPR’s) or earnings claims.

When franchising your business, a frequent issue is whether to give out FPR’s to prospective franchisees to help convince them your franchise opportunity is a good investment.

In the previous three blogs, I tackled various aspects of this topic:

  1. The definition of FPR’s and the rules pertaining to them.
  2. The negatives of giving out FPR’s.
  3. The positives of giving out FPR’s.

Always remember any FPR must have a “reasonable basis”.

In this blog, I will address “special circumstances” that may apply to your particular franchise opportunity when franchising your business. Special circumstances that may influence your decision to incorporate FPR’s in your FDD include:

  1. When first franchising your business, there are no existing franchises with whose owners your franchisee candidates can discuss their financial and operating history.
  2. Your franchisor-owned location(s) has such a loyal customer base in your home market it may be difficult to replicate in another location.
  3. When franchising your business, your industry already has some well-established competitors that use FPR’s in their FDD’s.
  4. Your franchise program has various types of locations, such as stand-alone buildings, shopping centers, pop up stores, malls, kiosks and specialty locations, for example, in airports or arenas.
  5. There are regional issues that may impact your decision to include FPR’s. For example, your franchise locations in one part of the country are more successful than those in other areas.
  6. When first franchising your business, your franchise program is not recognized in the marketplace.
  7. For a new franchise opportunity, your company-owned location(s) has a long operating history, which does not apply to a new franchisee.
  8. When franchising your business, you plan to group your franchisees in a particular market or area.
  9. If, when franchising your business, new franchisees are providing additional or different products or services from your existing locations.

If one or more of these conditions exist when franchising your business, you may decide to provide FPR’s in your FDD. A franchisor must carefully balance the increased likelihood of selling franchises with FPR’s against the liability inherent in providing FPR’s. Also, you must carefully meet the FTC guidelines for preparing FPR’s when franchising your business.

In my next blog, I will address alternatives to FPR’s when franchising your business.

Thinking About Franchising?

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So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form.  We look forward to helping you take your business to the next level and beyond.