What is a Franchise Pro Forma?

Pro forma_Page_1Per Wiki, a business pro forma:

….models the anticipated results of the transaction, with particular emphasis on the projected cash flows, net revenues and taxes. Consequently, pro forma statements summarize the projected future status of a company, based on the current financial statements.

Pro forma is Latin for ‘as matter of from’ or ‘for the sake of form.’

The answer to what is a franchise pro forma, depends on the figures included.

Pro forma_Page_2

A Pro Forma that lists cost figures only or no figures at all may be an advertisement, but is  not a financial performance representation, according to the recently released   NASAA’s [North American Securities Administrator Association] Franchise and Business Opportunity Project Group’s [Franchise Project Group] Proposed Franchise Commentary on Financial Performance Representations [FPR Commentary].

 

Discover 10 Franchise FPR Dos and Don’ts.  Click here or go to:  http://wp.me/p4bshS-17i

 

Per the FPR Commentary, if the pro forma does not have any figures or only cost figures, it should not be included in or attached to the franchise disclosure document [FDD].

And, if it is an advertisement, like suggested in the FPR Commentary, it must be submitted to some states before publication or distribution.

The FPR Commentary does not expressly so state, but if the pro forma includes revenue figures, or profits or other figures besides just cost, it may well be an item 19 financial performance representation, which requires inclusion in the FDD and adherence to all the requirements of financial performance representation.

 

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