Q&A

[Q] How can I check the earning claims made by franchisors?

[BIO] JONATHAN CHADD
Jonathan is the head of franchising for Leathes Prior Solicitors.

[A] The best way for any franchisee to verify the earning claims made by a franchisor is to enquire about their other franchisees. All franchisors should be willing to provide a prospective franchisee with a list of their franchisees, so that you can contact a random cross section to ascertain the accuracy of financial projections produced by the franchisor and the franchisees’ levels of satisfaction.

The franchisor should be asked to clarify the basis upon which they have arrived at the figures in any draft business plan or prospectus. In addition, the prospective franchisee should obtain a copy of the franchisor’s filed accounts and possibly also the filed accounts of some of its franchisees. These are documents of public record, which can be readily obtained and will give an accurate picture of financial status of those businesses.