Understand Franchise Earnings Claims

Many franchisors use the Internet to publish press releases containing information about unit performance, but you can find news articles about the company on the Web as well. If the company is public, review its SEC filings. The reports are available from most stockbrokers or can usually be obtained from the franchisor's Web site.

It's also important to understand how your franchisor's competition is performing. Robert Bond publishes a comprehensive compendium of earnings claims made by franchisors titled How Much Can I Make?(Source Book Publications). For more information, go to www.worldfranchising.com.

Investing in any franchise is an important decision, and putting together enough accurate information takes some time and effort. You should never rely on one source to make your decision, especially when so much additional information is available to you.

If you are not a sophisticated investor, seek the assistance of a franchise attorney, a consultant or an accountant. They can help you dig through the data and put together a meaningful projection for your future business. It's usually better to avoid asking for assistance from a franchise broker, as they work for the franchisor and therefore have an interest in your purchasing the franchise. Stick to independent advisors who have your interests in mind.

Michael H. Seid is managing director of Michael H. Seid & Associates, a West Hartford, Connecticut- and Troy, Michigan-based management consulting firm specializing in the franchise industry. Seid recently co-wroteFranchising for Dummies(IDG Books) with Wendy's founder Dave Thomas.