If you heard or got any earnings representations, report it fully during an interview or on a questionnaire or other statement. If you don’t, you may be waiving any right to contest the earnings representations that were made to you and that you used to make your decision to buy.

Financial History - The disclosure document gives important information about the company’s financial status, including audited financial statements. You can find explanatory information about the franchisor’s financial status in notes to the financial statements. Investing in a financially unstable franchisor is a significant risk; the company may go out of business or into bankruptcy after you have invested your money.

It’s a good idea to hire a lawyer or an accountant to review the franchisor’s financial statements, audit report, and notes. They can help you understand whether the franchisor:

    * has steady growth
    * has a growth plan
    * makes most of its income from the sale of franchises or from continuing royalties
    * devotes sufficient funds to support its franchise system