Search Results: due diligence

Jan 13, 2021

Attending large franchise conventions and visiting the franchisor’s headquarters are two hallmarks of the franchise due diligence process. They are also two events that have largely been put on hold during the COVID-19 era. But, franchisors are still selling – and franchisees are still buying – and those who are thinking about buying a franchise must still perform thorough due diligence in order to make an informed buying decision.

Feb 12, 2018

If you flip through a typical Franchise Disclosure Document (FDD), most of what you will find is page after page of small, dense text that was clearly written by an attorney. However, things change (briefly) when you get to Item 20. In Item 20, franchisors are required to produce a series of five standardized tables that provide historical information, current information and future projections about the size and growth of the franchise system. Carefully reviewing the data in Item 20 can tell you a lot about a franchise system. Has it grown consistently over the past three years? Have franchisees been leaving the system on a regular basis? Is the franchisor focused on expanding through franchising or company-owned outlets? You can gain insight into these issues and more through Item 20 of the FDD. Breaking Down Item 20 of the Franchise Disclosure Document (FDD) 1. Systemwide Outlet Summary The first table in Item 20 is labeled, “Systemwide Outlet Summary,” and it simply compiles data from tables three and four.  Here you will find: The total size of the franchise system (including franchised and company-owned outlets) The net change in franchised outlets for each of the past three years The net change in company-owned outlets for each of the past three years All of this information is important for assessing the health of the franchise system as a whole, and the later tables provide information that is specific to your state. 2. Transfers of Outlets from Franchisees to New Owners (other […]

Jul 21, 2017

In a previous article, we highlighted the importance of asking questions during the due diligence process, and we discussed four types of issues that demonstrate why franchisees should not rely on franchisors’ Franchise Disclosure Documents (FDDs) and marketing materials alone. We also mentioned the importance of talking to both current and former franchisees. This article covers some basic tips and questions to ask when contacting current and former franchise owners. How to Find Current and Former Franchisees But, before we get ahead of ourselves, how do you contact current and former franchisees? Fortunately, the requirements of Item 20 of the Franchise Disclosure Document (FDD) make this simple. In Item 20, franchisors must disclose contact information for: Current franchisees, Franchisees who have left the system within the past year, and Franchisees who have not communicated with the franchisor within the past 10 weeks. When contacting these individuals, keep in mind that they may have additional references as well. They may have an older version of the FDD that they are willing to share; or, they may know of other current or former franchisees who can impart particularly-valuable information. Questions to Ask Current and Former Franchisees During Due Diligence Once you start reaching out to current and former franchisees, what types of questions should you ask them? Here are some general recommendations: 10 Questions for Current Franchisees Has the franchise opportunity met your expectations? In what ways is operating your franchise different from what you expected? Are you consistently able to meet […]

Nov 1, 2016

When considering a franchise opportunity, it is critical to conduct your due diligence. Buying a franchise is a substantial, long-term investment, and your success or failure will hinge in large part on the actions, omissions and obligations of your franchisor. Franchise due diligence is an involved process that takes time, effort and a commitment to finding real answers instead of simply trying to validate your interest in the franchise. The following is a list of 10 examples of steps prospective franchisees can take to learn more about their potential franchise opportunities: Franchise Due Diligence: 10 Steps 1. Talk to Current Franchisees. How are their businesses doing? How long did it take them to become profitable? How supportive is the franchisor? Current franchisees can provide invaluable information to help you decide whether to pursue a particular franchise opportunity. 2. Talk to Former Franchisees. Former franchisees are a key source of information as well. Why did they leave the system? Would they do it again if they had the chance? What is their opinion of the franchisor? 3. Visit the Franchisor’s Headquarters or Company-Owned Location. The in-person visit is an important step in the due diligence process. You will want to meet the franchisor’s key personnel in person, and see if you think you will be a good fit for the way they do business. You should also try to visit several franchised locations. 4. Review the Franchisor’s Franchise Agreement and FDD. While you should hire an attorney to review the franchisor’s […]

Nov 28, 2025

The President and CEO of the International Franchise Association (IFA), Matt Haller, recently published an article discussing the advice he gives when people ask him whether they should buy a franchise. As he correctly notes, while buying a franchise can be a profitable investment, “that doesn’t mean franchising is right for everyone, or that every brand is right for you.” In the article, Haller shares his top three tips for prospective franchisees. Here, national franchisee lawyer Jeffrey M. Goldstein shares some additional insights on each of these three important considerations.

Nov 21, 2025

As we discussed last month, the Franchise Times recently released its “Top 400” list for 2025. Along with the list itself, the Franchise Times also published a handful of articles highlighting certain categories of franchises that made (or almost made) the list. One of these articles highlights five “breakout brands” that have reported significant sales growth over the past year. If you are thinking about buying a franchise, should you include a “breakout brand” on your short list? Here are some key considerations from national franchise attorney Jeffrey M. Goldstein.

Nov 14, 2025

Buying a franchise is an investment that requires informed and confident decision-making. If you are thinking about buying a franchise in 2026 and are new to the world of franchising, there is a lot you need to know. While buying a franchise can prove to be a profitable investment in the right circumstances, there are no guarantees. As a result, before you commit, it is critical to ensure that you have given due consideration to all of the risks involved. Learn more from national franchise lawyer Jeffrey M. Goldstein.

Oct 31, 2025

A recent article on Franchise Direct discusses the potential benefits of purchasing an “unconventional” franchise. It acknowledges the fact that new franchisees are increasingly becoming less interested in traditional brick-and-mortar storefront businesses, and it notes that alternate franchise opportunities “often work with lower overhead, meet specific market needs, and provide a fresh perspective on what it means to be a business owner.” But is it a good idea to choose an unconventional franchise? National franchise attorney Jeffrey M. Goldstein shares his thoughts:

Oct 24, 2025

The Franchise Times recently released its “Top 400” list for 2025. As the publication explains, the list reflects “the biggest franchise brands by global systemwide sales.” But the list provides some other notable insights into the current state of the franchise industry as well. National franchise lawyer Jeffrey M. Goldstein shares his thoughts:

Sep 30, 2025

The U.S. Small Business Administration (SBA) reinstated its Franchise Directory earlier this year. Its decision to discontinue the Franchise Directory in 2023 as part of a broader effort to streamline its lending programs was largely decried within the franchise industry, with the International Franchise Association (IFA) noting at the time that about 20 percent of all SBA loans go to franchisees, and that franchising had played a significant role in the United States’ post-pandemic economic recovery. Now that the SBA Franchise Directory is back, what do you need to know? National franchise attorney Jeffrey M. Goldstein explains.