Checklist of Information to Secure from a Franchisor
Use this checklist when doing your own investigation and information gathering.
57. Is the franchisor a one-person company?
58. Is the franchisor a corporation with an experienced management that is well trained?
59. Does the franchisor operate a business of the type being franchised?
60. Is the franchisor involved in other business activities?
61. Is the franchisor offering you an exclusive territory for the length of the franchise?
62. Can the franchisor sell a second or third franchise in your market area?
63. Do you have the right of first refusal to adjacent areas?
64. Will the franchisor sublet space to you?
65. Will s/he assist you in finding a location for franchise operation?
66. Must you least fixtures, signs or equipment from the franchise? If so, are the prices reasonable?
67. Does the franchisor provide financing? If so, what are the terms?
68. Does the franchisor require any fees-other than those described in the offering circular-from the franchisee? If so, what are they?
69. Has the franchisor given you information regarding actual, average or forecasted sales?
70. Has the franchisor given you information regarding actual, average or forecasted profits?
71. Has the franchisor given you information regarding actual, average or forecasted earnings?
72. What information have you received?
73. Will the franchisor provide you with the success rates of existing franchisees?
74. Will the franchisor provide you with their names and locations?
75. Are there any restrictions on what items you may sell? If so, what are they?
76. Does your prospective franchisor allow variances in the contracts of some of his/her other franchisees? What is the nature of the variances?
77. In the event you sell your franchise back to your franchisor under the right of first refusal, will you be compensated for the goodwill you have built into the business?
78. Does the franchisor have any federally registered trademarks, service marks, trade names, logotypes and/or symbols?
79. Are you, as a franchisee, entitled to use them without reservation?
80. Are there restrictions, exceptions or conditions? If so, what are they?
81. Does the franchisor have existing patents and copyrights on equipment you will use or items you will sell?
82. Does the franchisor have endorsement agreement with any public figures for advertising purposes? If so, what are the terms?
83. Has the franchisor investigated you carefully enough to assure himself/herself that you can successfully operate the franchise at a profit both to him/her and to you?
84. Has the franchisor complied with FTC and state disclosure laws? Are there any regulations specific to the industry in which your franchise business will operate? (Include any special licenses or legal restriction on operations set by statutes.)
85. Does the franchisor have a reputation for honesty and fair dealing among the local firms holding his/her franchises?
86. How many years has the firm offering you a franchise been in operation?
87. What is a description of the franchise area offered you?
88. What is the total investment the franchisor requires from the franchisee?
89. How does the franchisor use the initial franchise fees?
90. What is the extent of the training the franchisor will provide for you?
91. What are your obligations for purchasing or leasing goods or services from the franchisor or other designated sources?
92. What are your obligations in relation to purchasing or leasing goods or services in accordance with the franchisor's specifications?
93. What are the terms of your agreement regarding termination, modification and renewal conditions of the franchise agreement?
94. Under what circumstances can you terminate the franchise agreement?
95. If you decide to cancel the franchise agreement, what will it cost you?
96. What are the background experience and achievement records of key personnel (their "track records")?
97. How successful is the franchise operation? (Use D&B reports or magazine articles to supplement information the franchisor gives you.)
98. What is the franchisor's experience in relation to past litigation or prior bankruptcies?
99. What is the quality of the financial statements the franchisor provides you?
100. Exactly what can the franchisor do for you that you cannot do for yourself?