5 Tips About Reviewing the FDD

Today’s franchise prospect is bombarded with digital “resources” to help walk them through the process of becoming a franchisee. Unfortunately, a lot of these “resources” don’t give you the down and dirty facts about franchising – and what you need to know before venturing into franchise ownership. Thankfully, 1851 has attorney Harold Kestenbaum in its back pocket to provide a few pointers on reviewing the Franchise Disclosure Document: 1. Make sure that you are given the most current version of the FDD. You do not want one that is a year or two old. 2. The items that are most important and which you need to focus on first are 1, 3, 4, 5, 6 and 7. These will tell you about the company, whether there is any litigation, bankruptcies, what the initial fees are, what the ongoing fees are and what the initial investment is. 3. Take a look to see if there is an Item 19 - the financial performance section. If there is none, ask the franchisor why. And if there is, carefully review it with your CPA. 4. Make sure that you and your CPA go over the franchisor's financials. This is important and the input of a professional (CPA) is very important. 5. Lastly, and just as important as 1-4, make sure you call all of the franchisees located in your area, and get in your car and visit with them. They will tell you what they think and whether they like it enough to buy another one. Also ask if they had it to do all over again, if would they choose the franchise again. Harold Kestenbaum is an attorney who has specialized in franchise law and other matters relating to franchising since 1977. From May 1982 until September 1986, Harold served as franchise and general counsel to Sbarro, Inc., the national franchisor of over 1,000 family-style Italian restaurants and, was a director from March 1985 to December 2006. From September 1983 to October 1989, he served as President and Chairman of the Board of FranchiseIt Corporation, the first publicly traded company specializing in providing franchise marketing and consulting services and equity financing to emerging franchise companies, which he co-founded. Harold has authored the first book dedicated to the entrepreneur who wants to franchise his/her business called "So You Want To Franchise Your Business". It is a step by step guide to what a businessperson needs to know and do to properly roll out a franchise program.