After you’ve weighed your options between opening a franchise versus starting a business from scratch, it’s time to decide which franchise is the best fit for your goals. This is an exciting time of discovery, and the best tool to help you make your decision is the Franchise Disclosure Document (FDD). But what exactly is it and what does it include?
Company Information
A FDD includes a history and description of the franchisor, as well as information about the franchisor’s executive team. In addition to learning more about the franchisor, you’ll also learn who you’ll be working with, and what skills they bring to the table. You can also receive information about other franchisees so you can have a discussion with them about their experiences.
Initial Cost
Investment fees and startup costs may play a significant role in your decision. While these fees are often less expensive than starting a business from scratch, you need to know if you can afford to purchase and operate your own franchise. If the franchisor offers discounts, like a veteran discount, you can find this information in the FDD as well.
Potential Revenue
Most people who purchase a franchise want to know how much money they could expect to earn in their new business. The FDD is where you’ll find that. Earnings claims are given using Item 19 in the franchise’s FDD. Consider this: If Item 19 is missing, there’s likely a reason. This could be a sign that the franchise is ashamed of the potential revenue. You’d be wise to speak to several of the existing franchisees about their revenue before getting too deep in discussions with the franchisor.
Obligations
Both the franchisor and the franchisee have obligations that need to be met, and these will be fully outlined in the FDD. For example, the franchisor should include information about training, provided advertising and details explaining your purchased territory.
Trademarks and Copyrights
As a franchisee, you are your own business owner, but a franchise is required to provide information about how you can use the brand trademarks and trade names, patents and copyrights. This ensures that the company you are buying is presented properly to all potential customers at all times, which protects each franchisee’s investment.
At Honest Abe Roofing, we believe in full transparency with our potential and our existing franchisees. We’re happy to have an honest discussion with you, including sharing our Franchise Disclosure Document, which shows our average franchisee had $2,031,545 in annual sales, and our top-performing location had $6,688,150 in annual sales.
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