How do you verify the information and claims in a franchise disclosure document?

Prospective franchisees really need to invest the time required to interview current and former franchisees. These can't be ad hoc conversations. Have a thorough list of questions to ask. Don't just rely on current franchisees suggested by the franchisor. Look in the FDD and start calling. Interview of mix of existing franchisees who are top quartile, average, and struggling. Interview a minimum of 10 existing franchisees. Look for trends. Also, ask the franchisor for a copy of the Fund Report prepared by FRANdata. If it's a mature brand, look for top tier performance (750+). If it's an emerging brand the Fund Report won't have a score but will still be a helpful validation.

Comparing the FDD with these other sources can provide a more comprehensive view of the franchise opportunity. It helps you spot inconsistencies and validate the claims made by the franchisor. This thorough approach ensures you have a clearer understanding of what to expect and helps mitigate potential risks.

This is a key part of the process and it is called validation. In my opinion, it is the most exiting part of the Franchise Investigation process. Validation is a time for you to hear from the existing franchisee and it is a time for you to validate all you have heard from the franchisor.

And HOW you ask questions of these franchisees is more important than WHAT you ask them. Don't start off with the direct question of "how much money are you making?" Instead, build some rapport and trust first with a few questions that are less personal, like "Why did you choose THIS business?" or "What is a typical day like for you?" After they feel they can trust you, they may be more likely to share deeper info with you. Finally, keep in mind that these are busy business owners. They don't have a lot of time to spend in taking these calls; yet they also understand how valuable a step it is...for at one time they were in your shoes also! So be brief and respect their time.

Bear in mind that many franchisees will be reluctant to tell you anything derogatory about the franchisor or about any issues they may be experiencing. This may come from misguided optimism, loyalty or fear of retribution. So it would pay to take Randy's advice and build rapport and trust first, and then lead in with "soft" questions such as "Has your franchise purchase lived up to your expectations so far?"

Ao entrar em contato com franqueados e ex-franqueados, é importante considerar que podem fornecer uma vis?o parcial ou tendenciosa da franquia. Por isso, ao obter feedback, é essencial analisar o contexto das respostas, comparar diferentes opini?es e equilibrar as informa??es com outros dados disponíveis. Dessa forma, é possível obter uma vis?o mais abrangente e com menos vieses sobre a franquia. Você também pode estender essa pesquisa indo a campo conversar com a equipe e clientes de unidades franqueadas.

To ensure the accuracy of a Franchise Disclosure Document (FDD), it's essential to consult with professionals. A franchise attorney can help interpret legal language and obligations, while a financial advisor specializes in assessing the financial health and projections presented. These experts can spot discrepancies and offer insights into the franchise's viability. Their expertise ensures you're making an informed decision, safeguarding your investment by verifying the FDD's claims thoroughly.

To ensure the accuracy of a FDD, I’d recommend 1) Engaging in a conversation with current franchisees 2) Engage in a conversation with clients of those franchisees wherever possible and if pertinent 3) Engage in a conversation with those who are listed as attempting to become a franchisee who either decided against it or were not successful in their launch 4) Engage in conversation with former franchisees This amount of information may result in not having to consult an attorney in the first place or ensure that it is required now that you’ve satisfied your own due diligence and want to move forward with the assistance of someone familiar with legalese.

This is straightforward in verifying any earnings claim Financial Performance Representation - FPR. 1. If the franchisor makes a verbal FPR ask them to put that in writing and the FDD. 2. When the franchisor does not make an affirmative Item 19 FPR in their FDD ask them why that is and tell them you will pass on their franchise offering. 3. For franchisors who do make an affirmative Item 19 FPR in their FDD ask them for financial backup that they based the FPR on. They are required to provide this under the FTC Franchise Rule.

Mais duas formas de avaliar uma franquia: 1 - Verifica??o com associa??es: Verifique se a franquia é afiliada a associa??es de franquias reconhecidas, como a ABF (Associa??o Brasileira de Franchising). Você pode obter informa??es adicionais sobre a reputa??o da franquia e possíveis reclama??es formais. 2 - Avalia??o de reputa??o online: Examine avalia??es e comentários online em plataformas de reclama??o, redes sociais e fóruns. Isso pode fornecer uma vis?o mais ampla sobre a satisfa??o geral e eventuais problemas recorrentes.