While all parts of the FDD are important to not only read, but to understand, you’ll want to pay particular attention to these sections:
The question on everyone franchisee’s hopeful mind: many get into business wanting to secure financial future. To find the answer to this question, a franchisee must look into the information places in item 19. Item 19 will fill in any information it can about projected sales, income, profit, and costs of franchised/non-franchised locations. Do not rely on this 100% for information though and ask your franchisor for answers direction because only about 25%-35% of franchisors provide written information in the financial performance representation review.
Also be wary of any salespersons or franchisors who say they cannot tell you about projected sales or income because of the law. The only thing they’re not allowed to discuss regarding this is the numbers they’ve chosen not to include in the FDD information all together and the law regarding the FDD requires franchisor’s to tell you what they are leaving out of their financial performance representation.
As a franchisee, you don’t have to know everything there is to know about franchising through the franchisor’s point-of-view (POV), but it is important to understand them to an extent so you can meet in the middle-grounds. A franchisor will more often than not, have been in your positions as a franchisee before, whether they headed the company with one store before franchising the idea or they bought a franchise like you’re doing before they purchased the company itself. To make your relationship easier and to understand our franchisor, keep these common franchisor thoughts and worries in mind:
It’s important to understand things from the franchisor’s point of view when reading the FDD’s while also looking out for yourself because it can add a new level of understanding and detail to the information in the FDD. Even Rupert Barkoff, a partner of the Atlanta Firm Kilpatrick Stockton LLP says, “Even when intended to be helpful [financial performance representations] can be misleading because there are so many factors that enter in the success or failure of a franchisee. For example, hard work and diligence may make one franchisee successful, but might never offset the consequences of a poor site selection.”