Ready to Research a Franchisor?

Federal law requires a great deal of information to be provided in the franchise disclosure document, commonly referred to as the FDD.  There are 23 specific areas of disclosure, known as Items. The intent of the federal law is to educate buyers to help them avoid entering into business with predatory franchisors. The information in this document provides an overview of the rights and obligations of the franchisor and franchisees.  

Chances are high that the franchisor has a slew of competitors offering similar franchise opportunities.  Who is doing it better?  Who provides more support?  Who has more locations in your area?  How much is it going to cost you?  You can review competitor FDD's and answer many of these questions.  Some of the most important areas to compare are Item 5, 6, 7, 11, 19 and 20. You can also compare territory size, restrictions imposed, and more.  You can find these FDD's using these state databases:

Wisconsin: https://www.wdfi.org/apps/FranchiseEFiling/default.aspx

Indiana:  https://securities.sos.in.gov/public-portfolio-search

Minnesota: https://www.cards.commerce.state.mn.us/CARDS

California: https://docqnet.dfpi.ca.gov/search

Once you have the franchisors disclosure document, you can find contact information for current and former franchisees who recently left the franchise.  This information is required for "Item 20" however, the information is often not included with the other disclosures in Item 20.  The information is likely marked as an exhibit or attachment to the disclosure document.  Don't stop reading when you hit Item 23.  The contact information may be 100 or more pages into the document.  With this information, you can call or write people with actual experience working with the franchisor.  

For mutual success, the the franchisors culture and support must align with the personality and expectations of the prospective buyer.  The right person, at the right time, for the right opportunity. The best way to feel this out is by talking to the right people inside the franchisor.  Talk to people responsible for operational and marketing support.

Thanks to state regulations, you can pull a franchisors FDD from prior years.  You can determine how the system has changed.  Have the fees gone up?  Have the terms been shortened?  Are more obligations imposed?  This information can help you negotiate with the franchisor and also better evaluate your ability to succeed compared to existing franchisees.   These state databases may include prior year FDDs:

Indiana:  https://securities.sos.in.gov/public-portfolio-search

Minnesota: https://www.cards.commerce.state.mn.us/CARDS

California: https://docqnet.dfpi.ca.gov/search