The Franchise Business Plan & Earnings
Question About The Franchise Business Plan
Who is responsible for developing the franchise business plan and how does a potential franchisee obtain details and information about them? Does the company that offers the franchise help in developing the franchise business plans so that I can obtain a loan or other financial assistance? Every time I read about franchising, I never see any information on this topic.
The Business Plan & Financial Representations
You hear little about the franchise business plans and earnings because most franchisors do not want to touch the subject of income, especially as it relates to formal financial statements. Most franchisors now offer an FPR (Financial Performance Representation) in Item 19 of their disclosure documents. However, the production of a business plan is a delicate subject for franchisors. They are conditioned “not” to talk about earnings. If the reason is not obvious, then here it is in a nutshell. Franchisors do not want to load franchisees with ammunition if income figures are not met.
Franchise Business Plans & Post Sale Information
You should know, however, that franchisors are able to disclose all manner of income and sales once you become a franchisee even if that franchisor does not offer an Item 19 (Financial Performance Representation) in its Franchise Disclosure Documents. Is that too late to know the truth? The answer is both yes and no. The problem with most FPR’s is that they are not really full of helpful information. But what they do provide often is a trail of breadcrumbs that can lead to certain deductions.
So, What Should You Do?
We would suggest the following. First, explore only franchises that do provide Item 19 information. (In other words, disregard those unwilling to provide ‘some’ data.) Second, develop relationships with existing franchisees who can (legally) give you their performance facts, if they are so inclined. Bottom line, you, your franchise attorney and your accountant will have to much of the legwork and the franchise business plan. Buying a franchise is tricky business and risky business. Do lot’s of homework.