Category: Franchises
Franchises
Ed’s article points out the differences between a going business and a franchise. However, I do think that the purchase of an existing business is also an investment. If the new owner increases sales and profits, the business is worth more than when it was purchased by the new owner. I do admit that the economy does or can take a toll on the price one might get for a business – whether a franchise or an existing business. The price of a business, unlike a house, is based on its earnings, not on the ebb and flow of the residential real estate market. I do agree that increasing earnings during a recession is certainly more difficult than in a booming economy.
Ed does make one very important point and that is that the purchaser of a franchise is somewhat dependent on the franchisor and how they market their product or service, how much support is given, etc. Business brokers should read this and act accordingly. An individual who purchases a going business is in almost complete control of his or her business and destiny and, in my opinion, creating a solid investment if the business is successful. He or she is also not dependent in any way on the actions of a franchisor.
Ed’ article is excellent for both the buyer of a going business and an individual buying a franchise.
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See the top 10 franchise sectors with those franchisors that had trouble growing. I call them underperforming franchisors.
A few weeks ago I published an article entitled A Startling Franchise Industry Statistic . It reported on franchisors that had sold less than five new franchises despite having been a franchisor for several years. As a follow up to this article I took a look at which franchise industry segments had the highest percent of what I’ll refer to as the “Underperforming Franchisors”.
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This article is a continuation from yesterday's posting by Adam Bannister of businessesforsale.com.
Company culture
It’s also important to meet with existing staff before you buy. You need to know how many will stay, and what it will take – in terms of pay rises and other incentives – to make unhappy staff stay.
If staff have to be replaced you need to find out how much it will cost to hire and retrain replacements and incorporate that into your evaluation of the business.
And if you don’t get on with the staff or feel you’re at odds with the culture of the company then it’s best to look elsewhere.
You need to check...
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Franchise re-sales offer the possibility of quick profits.
If you buy a franchise resale – where the owner of a franchise has decided to put his business on the market – then you can reap the benefits that come with both buying a business and running a franchise.
As we’ve said elsewhere on this site, when you buy a franchise for sale you get to run your own business but with the brand power, marketing muscle and technical and administrative support of an established franchisor.
Quick profits
But if you’re buying an established venture, then not only do you have...
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In our most recent survey, it was quite obvious that the sale of existing franchises makes up a very small portion of sales. The sale of new franchises is almost non-existent. While it’s the sale of both that is of concern, the fact that the sale of existing franchises is so minimal should be of great concern.
Let’s face it, franchising is here to stay and, unfortunately, is slowly replacing many small businesses. Whether it’s fast food or a brand new concept, franchised small businesses are taking over. And, although they may be replacing many small businesses such as the fast food category, they are also bringing many new concepts to small business.
Most franchises are small businesses individually owned and operated. They are the small businesses of the future and business brokers should be handling the resales, if not the sale of new ones. The resale of franchises is no different than the sale of any small business. Yes, you have to deal with the approval of the franchisor, but in most cases, the lease is easier to transfer and other details may also be easier.
We strongly urge the main street broker to increase their efforts to handle the resale of franchises. Many of the owners have been in business for some time and are ready to move on. Our most recent survey reported that franchise resales represented less than 12 percent of their sales. That’s not nearly enough.
Have you had any franchise resales since November 2011?
We need your help in adding new franchise pricing data and maintaining updated information on our current franchise list. We have a very simple form which gives us sufficient financial information to create a Rule of Thumb.
We would be most appreciative if you would review your sales since November 2011 and complete the online form for all of your franchise resales. You will always be able to obtain a current list by emailing me personally.
To contribute franchise resale information, please use our online form.
Franchisee Feedback
The most important aspect of your franchise due diligence is to obtain feedback from current and former franchisees.
Speak with enough franchisees so that you have representative feedback. I would suggest a minimum of 8 to 10 franchisees. The more franchisees you speak with the more credible the feedback. You should speak with existing and former franchisees in order to gain a broader perspective.
Call franchisees in different parts of the country as well as in the geographic area you’re interested in. If you can...
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Following is an article by franchise guru Ed Teixeira. While it is written for franchise buyers, if you are considering representing a franchisor to sell new units for them (and why aren't you if you are not?), this article will help.
Performing a comprehensive evaluation of a franchise is a critical step before you pay the franchise fee and sign the agreement. Learn how to perform this important activity.
There are key steps in the franchising process but none more important than...
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During the process of gathering some franchise industry data I discovered an interesting statistic. Read more to learn out what I found.
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Comment from BBP:
The following article points out a number of reasons buyers need to complete their due diligence and choose wisely when selecting a franchise. This is important information for business brokers to be able to share with their buyers.
Current franchise agreements and judicial decisions can provide obstacles to franchisees who take legal action against their franchisor. The result is that prospective franchisees had better make the right decision when choosing and purchasing a franchise.
Individuals that decide to purchase a franchise should do an exhaustive evaluation of the franchise to confirm the following:
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Our sister website, FranchiseSales.com has published the results of its state of the marketplace quarterly survey.
The global survey of franchisors and franchisees, whose average age is 43 and 80% of whom are male, also revealed the most popular sector among franchise seekers as fast food, remaining recession-proof in times of squeezed incomes and unemployment.
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Before signing on that dotted line and paying the franchise fee there are certain questions that the franchisor should be asked. If you’ve already considered asking these questions kudos to you, however, chances are you’ve missed these.
Despite the amount of resources available to franchise candidates, mistakes continue to be made and franchisees can and do fail. Although there are no guarantees to success, individuals can lower the risk of failure by adding certain questions to their franchise evaluation process. Here are ten questions that a prospective franchisee should ask the franchisor.
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The number of home based franchises continues to grow and in some franchise segments the home based feature exists in a majority of the total franchise companies. This article presents some interesting statistics and the reasons why home based franchises continue to grow.
Looking back into franchise history the typical franchise was a bricks and mortar franchise whether it was a KFC, Dunkin Donuts or McDonalds. It wasn’t that long ago that a home based franchise was considered an anomaly or an exception to what we typically consider a franchise. In recent years however, things have changed as the number of home based franchises have continued to grow in numbers and popularity. If the franchise customers are not required to go to a specific location then chances are that particular franchise can be home based.
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This posting refers back to yesterday's listing of top franchise opportunities in 2011, courtesy of www.franchisebusinessreview.com.
Many of the franchises listed yesterday in the “best franchises” are small and in many cases very receptive to working with business brokers. Not only in selling new units, but in handling the sale of existing ones. Even when I was active in business brokerage we sold Orange Julius (the second sale I ever made), Tastee Freeze, Dairy Queen, etc. When franchises make up a very large segment of small business, and represent only 6 percent of the total business sales made by business brokers, a big opportunity is not being taken advantage of.
I can understand why business brokers have trouble selling new franchises. Commissions may be a lot less than a regular business sale. For example, a business might sell for $150,000 bringing in a $15,000 fee. A franchise might require a buyer to invest the same amount, but franchisors might not want to pay a $15,000 fee since the franchise fee might only be $30,000, but FF&E increase the amount to the $150,000 figure.
However, business brokers must realize
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Best Franchises by Category
As promised yesterday, here are the best franchise opportunities for 2011 sorted by industry category and investment level.
Courtesy: www.franchisebusinessreview.com
Advertising & Sales
Valpak
Category: Business Services, Advertising & Sales
Total Inv: $92,500 - $120,800
Automotive...
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"What is selling?" is one of the questions most often asked, not only by business brokers, but also by buyers and sellers.
What was selling then?
When I first got into the business brokerage business in Southern California, beer bars were the big seller. California, at the time, issued licenses for just the sale of beer and they issued separate licenses for hard liquor drinks. At the time they also issued beer and wine licenses, but these were generally issued to restaurants. Our brokerage office also sold a lot of small coffee shops, quick serve places, and coin laundries, but beer bars were the biggest seller.
So, what’s selling now?
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This article in BlueMauMau from John Gordon of Pacific Management Consulting, includes an updated private equity and restaurants report. The information details activity in the restaurant industry by private equity (PE) firms. The result? A lot of activity, investments, and some high profile failures.
Recently, FranchiseKnowHow published a two part series on Private Equity in Franchising.
© 2011 FranchiseKnowHow, LLC
Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at franchiseknowhow@gmail.com.
Franchise Business Review has recently created a special report on Veterans and Franchising based on the "independent satisfaction ratings and reviews by nearly 2,000 military veteran franchise owners.”
The report includes a list of the top 100 “Veteran-Friendly” franchises according to veteran franchisee satisfaction as well as a top 10 list of franchise systems with the most veteran franchisees.
Interesting information if you are working with military veteran buyers looking into franchise opportunities.
The report is available for viewing here.
Recently I interviewed Roger Murphy the founder of Murphy Business and Financial Corporation. Franchising since 2006, Murphy Business and Financial Corporation franchise has become a successful operation with 127 franchisees.
Every so often I become aware of a successful franchise that is under the radar. I can probably attribute this to the fact that most of the franchise news is focused on the giant franchises, the fast growing franchises and franchise litigation. After learning about the Murphy Business & Financial Corporation franchise I wanted to speak with its founder Roger Murphy. Having experience in both the franchising and business brokerage industry, I wanted to learn more about their franchise program.
In March of 1994, Roger Murphy started his company and it grew to thirty branch offices with over fifty broker/agents in Florida.
The company began its franchise program in 2006 with twenty six of the original offices converted to franchises. Since that time, the network has grown to 127 franchisees.
“The concept of the newly formed franchise was to provide the franchisees with “first class” back office support, comprehensive training, ongoing support from both a local and national level, and the best tools and resources available in the industry.
FKH: Roger, what services do the franchisees provide?
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We have listed franchises with a “quick” rule of thumb, or range, usually expressed as a percentage of sales. For many of them we have based it on quite a few actual sales; others may have been based on just a few; and in some cases just one where we felt it was appropriate. They can be a good starting point for pricing the business.
Many of the franchises are well known while others are very new with just several units. By the time this goes to press, some of the franchises may have folded, sold or merged. We try to keep this as up-to-date as possible. We could use your help. To contribute to our ever-growing list, just go to our Web site and click on Franchise Update and complete the form that will show up and email to us at tom@bbpinc.com and also if you find that a franchise has disappeared or merged, etc, please let us know. Obviously the big changes such as Mail Boxes to UPS Store will be caught by us or by our researchers (hopefully).
Keep in mind that rules of thumb are just that. Every business is different and rules of thumb will never take the place of a business valuation or even an opinion of value. But, they will give you a quick ballpark idea of what the business might sell for everything else being equal. A rule of thumb will tell you whether a seller is in the ballpark when he or she tells you what they think their business is worth or what they want to sell it for.
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The Massachusetts Supreme Court announced its decision in the case of Awuah v. Coverall North America, Inc. As a result of this ruling misclassifying workers as franchisees in Massachusetts could be very costly to franchisors. This important alert from Nixon Peabody provides a detailed summary of this important decision. Franchisors that currently operate in Massachusetts who bill customers and collect revenues on behalf of their franchisees and advance or submit payments to their franchisees, should be in touch with franchise counsel. Read the complete article and obtain the opinion.
Ed Teixeira is the founder and President of FranchiseKnowHow, LLC, a franchise-consulting firm. Ed has worked in the franchise industry for thirty years. He has served as a corporate executive for firms in the retail, manufacturing, healthcare and technology industries.
Following is a draft of the information we are gathering for the 2012 Business Reference Guide. Sandwich shops are good sellers for business brokers. Buyers like them because they are easy to operate, the hours are better than most quick service food operations; the prices are reasonable, and they are generally located in a shopping center and have a limited menu. Listing sandwich shops can be very profitable. Here is some information that might be helpful. Although the information is based on franchised operations, it can be relevant to non-franchised shops also.
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There are a number of advantages in owning a home based franchise. However, there can be disadvantages as well. Franchisees and franchisors should focus on the pros and cons of home based franchises when making their respective decisions.
A home based franchise operation can offer a number of advantages for franchisors and franchisees. Since the franchisee doesn’t need to locate and pay for a “bricks and mortar” location the initial investment and on-going operating costs will be lower and because it’s a home based location there will be less equipment costs. The time needed to start-up the franchise is usually less compared to a franchise with an offsite location. The overall investment in a home based franchise is typically lower than for other franchises and has the added appeal of the franchisee being able to work from home. These features should make it easier for the franchisor to sell franchises since they can choose from a higher pool of candidates.
A leading franchise advertising site lists 80 home based franchise opportunities with the following investment breakdown:
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Note from Tom:
I have written about pizza shops and how saleable they are. I mentioned that I can count six within a six mile area of my home – and we live 30 miles + from Boston. I recently found some interesting figures from the recent PMQ survey. The question was: How many pizza shops are there within a 10 miles radius of your shop?
| Less than 5 |
30% |
| 5 to 9 |
36% |
| 10 to 15 |
13% |
| More than 15 |
20% |
Indeed there a lot of pizza shops. In addition, I can’t remember ever seeing a closed one. That doesn’t mean that some owners haven’t put the key in the door, but I doubt that many have for lack of business. The good ones are very saleable. Following is some information that is current and we will be adding to it later in the year.
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When individuals purchase a franchise most will plan on selling the franchise at some future date or operate it until their children can take it over. I’ve encountered some individuals who plan on operating the franchise for the long term until retirement. If you’re considering buying a franchise a good approach to take is to plan on selling the franchise as part of your analysis. Learn why this strategy can be helpful.
When evaluating a franchise opportunity it might be useful to consider: What if I wanted to sell the franchise in five years? This scenario may not be your actual objective, however, it can change the way you evaluate and consider a specific franchise opportunity. It can create a sense of urgency and a timeline that will emphasize certain aspects of the franchise. Private equity funds and venture capital firms take a cautious look into potential businesses they might invest in. The reason is because they want a return for their investors in a period of 3 to 5 years. This benchmark requires them to evaluate an investment opportunity with a critical eye. You can use this same approach, although you may not have the benefit of Ivy League MBA’s to perform the analysis.
In addition to the questions and areas that ought to be a part of any franchise evaluation lets place a bit more emphasis on the following areas:
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At a recent meeting the Coalition of Franchisee Associations ( CFA) ratified the Universal Franchisee Bill of Rights. It’s important that franchisors and franchisees understand what this document states.
Whatever role one plays in the franchise industry it’s important to recognize and be aware of important change. An example of this type of franchise industry change recently took place. On June 22, 2011, the Coalition of Franchisee Associations (CFA) unveiled the Universal Franchisee Bill of Rights during the CFA Day Forum. The CFA’s Fair Franchising Committee presented the document to representatives from CFA member associations and individual franchisees.
The Universal Franchisee Bill of Rights contains a number of key components, including: freedom of association, good faith and fair dealing, full disclosure regarding fees, fair sourcing of goods and services, right to renew the franchise, right to transfer, encroachment, termination rights and fairness in dispute resolution.
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The fitness industry continues to be one of the fastest growing concepts in the franchise industry. This article provides a look inside the fitness franchise craze and why this sector will continue to grow.
As Americans become more health conscience and focus greater attention on diet and exercise, the personal fitness industry continues to benefit from this healthy trend. According to its 2010-2011 forecasts, the Bureau of Labor Statistics predicts employment of fitness workers is expected to increase 29 percent over the 2008–18 decade, which is much faster than the average for all occupations. These workers are expected to gain jobs because an increasing number of people are spending time and money on personal fitness, as more people recognize the benefits of health and fitness programs.
The United States Department of Commerce reports that there are approximately 31,000 fitness centers and health clubs in the United States and franchises represent almost 65% or 20,000 of the total, which includes personal fitness programs unique to franchising, such as Jazzercise. There should be little doubt that the personal fitness industry will continue to provide significant opportunities for individuals looking for franchises with a strong upside.
Market Potential is Key
When considering any franchise opportunity, market potential is an important factor. A strong and vibrant market for a franchise provides the right climate for...
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It seems like every time we visit our son Ron in Wilmington, NC, there is a new franchised sandwich shop that has opened in the area. In gathering data for our 2012 Business Reference Guide (it is hard to believe that this will be the 22nd edition), we began playing with some of the figures. Following is an update on some of the shops. The listing of the various franchises has the rule of thumb for pricing them along with the average annual sales figures that we have so far. The rest of the data is just our rough calculations.
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It’s important that franchisors disclose as much meaningful financial information about their franchise opportunity as possible. Providing franchise candidates this kind of information can prevent future franchisee problems from arising.
Recently, I received a telephone call from an individual looking to purchase a franchise. The person received my newsletter and asked if I could answer an important question. He explained that he was considering several locations to lease space for a franchise. He had contacted the franchisor about operating costs. In particular, he was seeking some information regarding the costs for leasing retail space. According to the prospect the franchisor told him that he couldn’t provide any cost or expense data other than the information contained in the FDD. My first response was to ask if he was represented by a franchise attorney. His response: “Not yet.”
I explained to him, that under the Revised Franchise Rule, cost and expense data was not considered to be a financial performance representation. I provided a quick overview of the FDD and in particular Item 19, explaining how the previous regulations were strict and somewhat ambiguous when it came to financial disclosure. Now, franchisors can disclose expense and cost data, which should help franchise prospects make a more informed decision. My admonition to the individual was to seriously consider whether he should proceed in purchasing the franchise.
This isn’t the first time this situation has come up. Franchisors that hide under the previous Item 19 requirements
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Everyone, especially the franchisors, brags about how successful franchising is and how much safer it is for would-be business owners to buy a franchise as opposed to an existing non-franchised business. Blue MauMau's recently released chart of the 25 franchises with the highest SBA loan default rates clearly demonstrates it “ain’t always comin’ up roses,” with the #1 worst franchise investment boasting a 71.1% SBA loan default rate.
According to Blue MauMau, "Some of the perennial worst franchises to buy — hoagie sandwich shops, ice cream stops, and auto repair garages — dominate this year's list. The recession has only helped their failure rates climb."
Ed Teixeira of FranchiseKnowHow.com commented on the value of this list. "Consider that loan defaults don't happen overnight but rather reflect a certain continuum of franchise performance...I'll offer my unsolicited comment that releasing this kind of information is important for the franchise industry. So many of us enjoy and depend upon this industry and it appears that there are always a certain number of franchise concepts that are definitely flawed."
In a report by Franchise Update Media Group, 57% of the franchisors responding to the survey reported using franchise brokers. Despite the use of franchise brokers by franchisors their use remains somewhat of a controversy. This article explains why.
The use of franchise brokers by franchisors has grown dramatically over the past 10 years. Industry sources indicate that over 50% of franchisors use franchise brokers. By franchisor brokers, I refer to firms with a broker network versus the sole proprietorship. The use of franchise brokers is not limited to a particular size franchisor; franchisors both large and small use franchise brokers.
Start-up franchisors utilizing brokers can receive a boost in starting up their franchise system. The challenge is that many franchise broker firms are reluctant to market franchises represented by a brand new franchisor. In fact, if a franchise broker is willing to include a start-up franchisor in their portfolio one could question the judgment of the broker group since the start-up has no franchise history or performance.
Whenever, I’m asked about using franchise brokers I explain that franchise brokers can be a benefit, however, their service is limited to providing the franchisor a completed application from a qualified prospect. This means that...
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This article from Nixon Peabody in their Franchise Law Alert, outlines key components of proposed food labeling regulations by the FDA.
The Food and Drug Administration has issued two proposed regulations to implement calorie labeling requirement for menus, menu boards, and drive-through menu boards in franchised restaurants and retail food establishments with 20 or more locations. The requirements would include vending machines. Considering that approximately 50% of restaurants are franchise operated, these proposed regulations if enacted, will impact franchisees.
compiled by Tom West
View Franchise Rules of Thumb for franchises from Red Robin to Zoo Health Club.
View the complete Franchise Rules of Thumb list from A to Z on our web site.
More detailed franchise information can be found in our annual Business Reference Guide or on our continually updated online version of the guide -- BRG Online.
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compiled by Tom West
View Franchise Rules of Thumb for franchises from La Estancia to Quizno's Classic Subs.
Tomorrow's posting will complete the list of Franchise Rules of Thumb.
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compiled by Tom West
View Franchise Rules of Thumb for franchises from Dairy Queen to Kuman Math & Reading Centers.
More detailed franchise information can be found in our annual Business Reference Guide or on our continually updated online version of the guide -- BRG Online.
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compiled by Tom West
View Franchise Rules of Thumb for franchises from AAMCO Transmission to Curves for Women.
Have you had a franchise resale within the past 12 months? You can share information about your franchise resale by completing the form at http://bbpinc.com/franchise-resale-form.aspx.
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compiled by Tom West
Throughout this week we will be posting a list of almost 200 franchises with a “quick” rule of thumb, or range, usually expressed as a percentage of sales. For many of the franchises, the information is based on quite a few actual sales; others may have been based on just a few; and in some cases just one where we felt it was appropriate. They can be a good starting point for pricing the business.
Many of the franchises are well known while others are very new with just several units. By the time this information gets published in our print guide, some of the franchises may have folded, sold or merged. We try to keep our information as up-to-date as possible. We could use your help. To contribute to our ever-growing list, just go to our online form, complete the requested information, and click "Save." Also, if you find that a franchise has disappeared or merged, etc, please let us know by emailing tom@bbpinc.com. Obviously the big changes such as Mail Boxes to UPS Store will be caught by us or by our researchers (hopefully).
Keep in mind that rules of thumb are just that. Every business is different and rules of thumb will never take the place of a business valuation or even an opinion of value. But, they will give you a quick ballpark idea of what the business might sell for everything else being equal. A rule of thumb will tell you whether a seller is in the ballpark when he or she tells you what they think their business is worth or what they want to sell it for.
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by Ed Teixeira
Yesterday's blog post discussed Item 19 disclosures for franchisors including some of the benefits. Today's post will explore other options that enable a franchisor to provide important financial data to prospects.
The Options:
Under the amended FTC Rule franchisors can provide prospective franchisees operating cost estimates, such as for labor, ingredients and products, so long as this information is not presented as a percentage of gross revenues. If it is, then an Item 19 disclosure must be made. Additionally, a franchisor can provide the prospective franchisee with a price list for its product line. If the franchisor does provide prospective franchisees with cost and expense information, the information must be consistent with the information contained in Items 5, 6, and 7 of its FDD. Cost information in combination with additional FDD disclosures can enable a franchise candidate to construct financial projections.
In addition, a franchisor can make an Item 19 disclosure for revenue only. By providing revenue figures a prospective franchisee has a basis to develop a break even and cash flow projection.
Some franchisors list franchisee revenue without identifying the franchisee by name or location. This is a rather simple process that a franchisor can follow.
When a franchisor refuses to provide the most basic financial information to prospective franchisees, some consider this to be a red flag. It creates the perception of negative financial results from their franchise network.
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by Ed Teixeira
An Item 19 disclosure is an optional franchisor disclosure made in the Franchise Disclosure Document (“FDD”). It presents the financial performance of the franchisor affiliates, franchisees and company-owned units. It’s been reported that 25-40% of franchisors make a disclosure under Item 19. Based upon various discussions with industry experts I will err on the conservative side and say it’s probably around 30%.
There are numerous reasons why more franchisors don’t provide an Item 19 disclosure:
- Difficulty in obtaining consistent and credible data from the franchisees. The fear that some data is not accurate.
- Complexity of gathering, verifying and presenting the data especially on the part of large franchise systems.
- Disclosing financial data that can be viewed by competitors.
- Mixed financial results, whereby some franchisees perform poorly.
- Reluctance to project future financial performance to prospective franchisees.
- Impacting the due diligence process of prospective franchisees, whereby some could be swayed by the disclosure when making a decision to purchase the franchise.
I expect these reasons will continue to play a role in the decision not to make an Item 19 disclosure.
Franchisor benefits from an Item 19 disclosure:
- Can provide credible financial data to franchise prospects (providing it’s verified).
- Sets the franchisor apart from those franchisors that fail to make this disclosure.
- Can accelerate the franchise prospects due diligence process.
- Forces the franchisor to gather franchisee financial results and thus better monitor the network.
- Can boost the sale of new franchises.
- Can be used by the franchise prospect to conduct a more thorough financial analysis.
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by Jeff Fabian
Item 5 – Initial Fees
Item 5 is where franchisors must disclose their “Initial Franchise Fee” and certain other related information. If the franchisor offers different “levels” or “packages”, each of the alternative initial fees has to be disclosed. If the amount of the Initial Franchise Fee is tied to the size of a franchisee’s territory, this must be disclosed as well. Any required pre-opening purchases from the franchisor or its affiliates must also be disclosed in Item 5.
Information that franchisors must disclose in Item 5 includes:
- The amount, range or formula for calculating the Initial Franchise Fee
- Whether any “application fees” will be credited toward the Initial Franchise Fee
- Whether full or partial refunds are available (for example, if the franchisee is unable to lease a suitable location within a specified time period)
- Whether the franchisor offers an installment plan (though the franchisor may opt to disclose this in Item 10)
If a franchisor does not offer refunds or installment terms (which is not unusual), it should include a “negative disclosure” to this effect in Item 5 (i.e. “We do not offer full or partial refunds under any circumstances.”).
Item 6 – Other Fees
Franchisors must disclose all fees and other amounts to be paid to the franchisor or its affiliates after the franchisee opens for business in Item 6.
Fees and other payments commonly charged by franchisors include:
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