What can you tell a buyer about a franchise outlet?

8-03-2

Per the Nation’s Restaurant News:

Wendy’s same-store sales rose 3.1 percent in North America during the third quarter ended Sept. 27, the company said.  

And, there are now opportunities to franchise a Wendy’s store!

[Wendy’s] Executives expect to continue selling company-owned restaurants to franchisees, with Wendy’s on track to sell 225 locations to operators this year, and another 315 units next year.

http://nrn.com/same-store-sales/wendy-s-value-deal-drives-3q-sales

 

So what can the Wendy’s franchisor tell prospective franchisees looking at buying an existing Wendy’s location?  For the last couple of weeks, we have been blogging about franchise financial performance representations [FPR] which must be disclosed in the franchise disclosure document [FDD].

 

Read the post about FPR:

If a franchisor wishes to disclose only the actual operating results for a specific outlet being offered for sale, it need not comply with this section, provided the information is given only to potential purchasers of that outlet.

 

That means, when selling existing outlet locations, franchisors may disclose:

  • To prospective franchise buyers only,
  • The actual financials of the existing outlet location only,

And

  • The actual financials of existing location are not subject to FTC Disclosure Rule item 19 financial performance representation requires
  • The actual financial outlet information does not have to be included in the FDD

 

Before giving the actual financial, wait.  Even though the disclosure of the actual financials may not have to follow the FTC Rule, a disclaimer should be included.  Corporate operating results may be different than franchise results.  If the results are from a prior franchisee operation, you may not be able to validate or take ownership to the financials.  And, remember past operations are not necessarily a guarantee of future results.  Include a disclaimer.

 

The disclaimer should  include warnings that past performance is not a guarantee of future performance, corporate cost structures may be different from franchise, and any other circumstantial specifics that may be prudent.

 

Need help preparing a disclaimer, give us a call 513-400-3895 or send us an email mbgettins@gettinslaw.com

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