Obtaining Financial Information About Franchises in Georgia

Franchisees have access to several methods of obtaining financial information about franchises in Georgia. In practice, franchisors cannot withhold or obscure that information without violating the Federal Trade Commission (FTC) Franchise Rule.

Our attorneys at Franchise.Law help franchisors understand their financial disclosure obligations and provide necessary information that enables prospective franchisees to make intelligent and informed decisions. Our firm maintains offices and licensure in North Carolina, but since we focus on multi-state and federal franchise law, we can represent clients in Georgia and other states. If you are a franchisor planning to establish or expand your franchise, contact Franchise.Law today.

What Is a Franchise Disclosure Document?

The FTC requires all franchisors to prepare a comprehensive Franchise Disclosure Document (FDD), with disclosures that give prospective franchisees an accurate picture of the company’s finances. Before any franchisee executes a franchise agreement or pays any money to the franchisor, the franchisee must have at least 14 days to examine the FDD.

Key aspects of the FDD’s financial disclosures include:

• A comparison of income and profits earned by other franchisees, if available
• A detailed analysis of the total investment required to acquire and begin operating the franchise
• Historical charts or graphs showing the franchisor’s expansion or contraction over various time periods
• The upfront franchise fee, required royalties and periodic payments, and other fees and costs incurred by the franchisee, such as marketing and promotional expenses
• At least three audited financial statements reflecting the franchisor’s operations, with balance sheets, income statements, cash flow statements, and debt-to-income ratios

Some franchisors also provide contact information for current and former franchisees. A prospective franchise purchaser in Georgia should always contact the parties on this list to acquire a better picture of franchisee turnover, economic data, and common problems or issues. If you have questions about whether and to what extent you should disclose certain financial information, consult with one of our knowledgeable attorneys from Franchise.Law.

Other Sources for Financial Information

Competent Georgia franchisees have other avenues to collect financial information about franchise companies they intend to invest in. If those other resources show information that contradicts a franchisor’s FDD disclosures, the franchisor’s attempt to expand a business may fall short.

A franchisee, for example, might look at:

• Publications from franchise industry associations
• Litigation databases, such as WESTLAW, that reflect lawsuits over the company’s finances or operations
• News articles, press releases, and other online or physical publications that refer to financial information about the franchisor
• Filings in the Securities and Exchange Commission’s electronic data gathering, analysis, and retrieval database, if the franchisor has made a public offering of its stock

Franchisors should monitor these and other financial information resources to verify the accuracy of financial statistics that they publish. At Franchise.Law, we often survey public financial resources to prevent inconsistencies that can impair franchisor-franchisee relationships.

Call Us Today To Learn How Georgia Franchise Investors Access Financial Metrics

The consequences of inaccurate or incomplete financial disclosures can be devastating for a franchisor. You might believe that your audited statements and balance sheets provide the information that people want, yet those documents can omit material that is crucial for full compliance with the FTC’s strict regulatory requirements.

We could help you manage those risks by reviewing your FDD and associated documents and materials to verify that your disclosures comply with the requirements for obtaining financial information about franchises in Georgia. One of our lawyers could give you the assurances that you need to move forward with your franchise operations. Call us today to schedule a consultation.