The franchisor has a choice. It can disclose actual or potential sales, profits or earnings of franchisees. Or it can say nothing on the subjectwhich is what most franchisors choose to do. If the franchisor does make any earnings claims, the offering circular must describe the factual basis and material assumptions that underlie the claims. For earnings claims to make sense, you need to know the franchise locations that the numbers are based on and the number of years that they have been in operation.
Actual figures are, of course, more helpful than hypothetical projections.
Before you buy a franchise, have your accountant go over the numbers with a fine tooth comb and check with a number of existing franchisees to see how they're doing. The information in this part of the circular can be a gold mine if you take advantage of it. The franchisor must list the total number of franchise locations and state how many of them were in operation when the offering circular was prepared and how many are covered by franchise agreements but are not yet in operation. The franchisor also must list the names, addresses and telephone numbers of all franchises in your state. A company with a hundred franchises up and running has had a chance to test its business formula and has experience in helping franchisees get started.