There’s a lot at stake. It is important for you and your family to invest in a Healthy Franchise System. Therefore, due diligence must be given to researching what franchise system will work best for your interests.
No two Item 19 Financial Performance Representations are made the same. Currently, the amount of information disclosed is at the franchisors discretion as there is no standardization for what must be included. Some systems, both Healthy and Unhealthy, choose not to disclose an Item 19 altogether for various reasons.
70.4% of Healthy Franchise Systems Disclose an Item 19 Compared to Only 51.9% of Unhealthy Franchise Systems.
In addition to disclosing more often, Healthy Franchise Systems tend to disclose more relevant information. The more information that is readily available the better. When used in conjunction with other sections such as Item 6, an Item 19 should give a prospective franchisee all of the information needed to create a comprehensive cash flow analysis. This will allow for proper consideration and an informed choice when investing.
We have completed a study on the changes in Ongoing Fees in the franchise industry using our data from 2013 – 2016 to publish the report.
A Franchise Disclosure Document (“FDD”) presents key components of the franchise program including the obligations of the franchisor and franchisees.
As franchise system development becomes more competitive franchise systems are employing a new strategy to grow their brand and increase franchise sales.
The composition of the franchise investment differs in key areas such as: franchise fees, royalty rates, territory protections and Item 19 disclosures.
Data has become essential to having a successful franchise development team. Those that maximize the power of data will sell more franchises.
When reviewing an FDD, we always keep our eyes out for any errors. The error that is the most troublesome for us is when we see Item 20 errors.