What Numbers Say About Franchising – Fran Finders


Today I am going to talk to you about how the numbers tell the true story about the franchisor’s profitability.

When you receive a copy of the Franchise Disclosure Document, you can get overwhelmed by this lengthy document. However, I will identify a few simple tactics to analyze the franchisor’s corporate financials.

When you receive the FDD, instead of starting with Item 1, I recommend that you begin reviewing the Audited Corporate Financials first, which is in a separate exhibit of this document.

In this first step, you will want to start with a review of the Balance Statement. You will need to analyze the total assets to total liabilities and determine the owner’s equity. Is it improving, staying the same or declining in value?

The next step is to review the Income Statements for the last 3 years. We analyze all revenues, which include royalty payments and all other income, and then compare these figures to the total expenses. We determine how the gross and net margins are trending over the last years? Have they improved, stayed the same or declined?

Finally, we evaluate the cash equivalents for the last 3 years. What are the cash reserves at the beginning of year compared to the end of the year? Are they stronger than last year and the year before or are the numbers deteriorating.

If the numbers are declining, we will need to ask the franchisor to explain “why” and then determine how to proceed with the document review.

If you start with analyzing the financial statements first, you can confirm very early in the process, how you want to proceed, which will save you a lot of time.

Don’t overlook this important information. These numbers are very important to analyze the viability of the franchise system. So take your time and ask questions.

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Sue Bennett is the CEO/Co-Founder of FranFinders, a franchise consultancy and funding group.

At FranFinders, we are more than franchise consultants. We are “Your Partners.” Throughout your franchise search, from the Initial Call to your Grand Opening, we are with you “Every Step of the Way.”

By partnering with us, you get our Experience, Knowledge and proven 10 Step Franchise-Buying Process that will bring Clarity and Direction to your franchise search. Gain Confidence, knowing that you are partnering with professionals.

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Star of Discovery Channel’s “Undercover Billionaire,” Grant Cardone owns and operates seven privately held companies and a private equity real estate firm, Cardone Capital, with a multifamily portfolio of assets under management valued at over $4 billion. He is the Top Crowdfunder in the world, raising over $900 million in equity via social media. Known internationally as the leading expert on sales, marketing, and scaling businesses, Cardone is a New York Times bestselling author of 11 business books, including “The 10X Rule,” which led to Cardone establishing the 10X Global Movement and the 10X Growth Conference, now the largest business and entrepreneur conference in the world. The online business and sales educational platform he created, Cardone University, serves over 411,000 individuals and Forbes 100 corporate clients throughout the world. Voted the top Marketing Influencer to watch by Forbes, Cardone uses his massive 15 million plus following to give back via his Grant Cardone Foundation, a non-profit organization dedicated to mentoring underserved, at-risk adolescents in financial literacy, especially those without father figures.