Item 1 - THE FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES

Item 1 outlines the history of the franchisor, including its parent companies, predecessors, or other affiliated entities. This Item includes a description of the franchise, a disclosure of area development proposals or master franchise agreements and provides additional market information identifying any potential competitors or industry-specific regulations.

Objective

  • Gain an understanding of who the franchisor is, including their relationship with affiliates. If necessary, consult an attorney or your accountant to review the affiliations.

Important Considerations

  • Does the franchisor have any affiliates?
    • If yes, be sure to review each and identify any history of financial difficulties, lawsuits, complaints or other concerns.
  • How saturated is the competitive market?
  • How long has this franchise been in operation?
    • If applicable, how long have the parent company and any other affiliates been in business?
  • Are there any industry-specific regulations that apply to operating this franchise?
    • If so, how might they impact your business? Ensure that state laws allow you to conduct the business activities the franchisor offers, especially for franchises related to healthcare.
  • Is the franchisor sufficiently capitalized?
    • In worst-case scenarios, if you end up having a dispute with an undercapitalized franchisor, you could be left with little recourse, and minimal chance for indemnification (compensation).
  • Have there been any structural reorganizations?
    • If so, why? How frequently?

Item 2