However, with that said, there is a section of the Franchise Disclosure Document (FDD) that may have an earnings claim for that particular franchise. Only about 30% of franchises provide an earnings claim in the FDD. They may exclude this for several reasons and if they DO NOT include it, it does NOT mean they are a bad franchise. If they don’t include it and you like the franchise, ask them why they don’t include it. Many believe you should get the information straight from the franchisees so you can interpret it how you see fit. Of the few that do provide them, they report it in many different ways.
Some provide just a range of the sales, sales for each unit, or what they think is a good representation of sales overall. Others may include more information such as cost of goods (COGS) so that you can see how much money you will be left to pay expenses. Others may even give you a breakdown of fixed expenses that all franchisees have.
You wan to keep in mind that you will have different expenses. For instance, you may have to hire employees while another franchisee may have family help and pay them off the books, or work night and day to keep expenses down. You wan to make sure you are comparing apples to apples when looking at earning claims. To do this, you should contact the franchisees to see exactly how they are operating.
The other benefit of a franchisee providing an earnings claim is that you can use it to help put a business plan with financial projections together. You can do it without the earnings claim but it simplifies the process and you can make projections quicker this way.
If you are looking for a franchise and you prefer one that has an earnings claim, check out our website because we just added a section for franchises with an earnings claim. Check them out at here. If there is something that interests you, we can help you get more information and make sure the franchisor makes you a priority.
Kevin Blank,
Franchise Consultant,
Integrity First Associates Inc,
http://www.franchisesmadesimple.com
