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.
- 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.
- 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?