Quantcast

How Much Money Can I Make If I Buy This Franchise? Financial Claims

| 0 Comments | 0 TrackBacks

"Financial Claims" could mean one of two things. The first possible meaning of "financial claims" is what's known as earnings claims or earnings projections that can be (but are not required to be) contained in a Disclosure Document.

This type of financial performance data is typically data that represents how certain franchisees in the system are performing financially. It can represent average performance, low/medium/high performance, and so on. This data can be verified in one of (or a combination of) three ways.

The first thing to do is gain an understanding of the data and carefully read the wording in the Disclosure Document that explains the basis of the data: this wording will tell you whether the data presented is only representative of, for example, franchisees that have been in the system for 5 years or more, or with territories of a certain size, and so on.

The second way to verify the data is by doing a little bit of due diligence. A list of all existing franchisees, as well as recently closed franchisees, should be included in the Disclosure Document. Call those franchisees, both current and past, and ask them if their performance is representative of that contained in the Disclosure Document.

If you feel you need more verification, a third way to verify the data is to attend at the franchisor's headquarters and ask to see the actual data that has been summarized in the Disclosure Document.

The second possible meaning of "financial claims" in this question could mean any claims the franchisor has made about its own performance.

This is verified by reviewing the franchisor's financial statements that are included as an exhibit to the Disclosure Document. Anyone not familiar with financial statements would be well-advised to have an accountant or other qualified financial advisor review the statements.

LinkedIn Profile

LinkedIn Profile

Leave a comment

Authors

Archives

Search for Articles

Follow Us

About this Entry

This page contains a single entry by Taimi Williamson published on February 12, 2013 5:35 PM.

Are You a Bad Franchisor? was the previous entry in this blog.

How You Can Stop Making Bad Decisions is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.