EARNINGS
CLAIMS
The
financial statements in Item 19 are important.
Have your accountant go over these carefully.
The franchisor may say that they don't make
any earnings claims, but then make oral
claims at a personal meeting. This is highly
suspicious.
Most franchisors
do not provide information about the earnings
potential of the franchise, but if they
do, the data must conform to certain standards.
Be aware that average incomes can make the
overall franchise look more successful than
it is if a few very successful franchises
are averaged into the figure. NET
income figures should reveal more to you
than gross sales figures that do not subtract
overhead expenses, such as rent..
If any
franchisee has gotten a lower franchise
fee within the past year, it will be noted
on the new format UFOC in Item 5.
Remember that the franchise fees and other
fees are NEGOTIABLE. Many items are
negotiable. You may want to negotiate
for a higher quality protected territory
or for the right to purchase your supplies
from a lower cost supplier than the one
that the franchisor has designated. Include
any verbal agreements in the final written
agreement.
Product
and supplier information is listed in the
UFOC in item 9. Many franchisors require
that you purchase supplies from special
cooperatives or suppliers. There may
also be standards for purchases. If
you think you can get a better deal from
another supplier you may want to negotiate
for this.
OBLIGATIONS
OF THE FRANCHISOR
The franchisor
is required by contract to deliver the services
listed in item 11, such as supervision,
assistance and advertising. There
may be restrictions on your advertising
or a minimum that must be spent on local
advertising. It’s best to get as much
money as possible for your local ads.
