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July 12, 2019

Here are some high points to hit in franchise disclosure documents

 

Becoming a franchisee can be a daunting challenge. The prospect of slogging through a franchise disclosure document, which all franchisors, including Tint World®, must provide prospective owners per Federal Trade Commission regulations don’t help matters much.

There is a lot of boilerplate, though, and some sections merit more scrutiny than others. Here’s a quick look at the most important sections of a financial disclosure document to consider should you decide to begin the process of becoming a franchisee of Tint World® or other business.

  • Royalties/Fees: This section stipulates exactly what fees franchisees will need to pay. Digest this section carefully, as you will be responsible for paying these fees should you become an owner.
  • Initial investment: Just like the fees section, this is especially important. FDDs need to provide a high and low end of how much franchisees will need to provide upfront and how much working capital will be needed.
  • Territory: You need to pay careful attention to this section, too, as the franchisor may – or may not – guarantee exclusive territory to a franchisee.
  • Sales: If there is no section on franchise profitability or expenses, request it, as it is not required for inclusion in an FDD.
  • Finances: Franchisors must provide three years of audited statements, including cash flow and balance and income reports.
  • Contracts: Any documents or agreements you will need to sign before finalizing your franchise agreement need to be included in the FDD.

Franchising can be a very profitable and rewarding endeavor. It can be complicated, however, and if you lack legal or business experience, you will likely want an attorney or accountant to walk you through the FDD and any other contractual items.

Download the Tint World® franchise kit if you are interested in pursuing a deal with one of the largest tinting, after-market and car accessories franchises in the country.

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