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How can I check the financial track record of a franchise business?
The simplest way to check a franchisor’s financial track record is to ask the franchisor for further information. Another option is to talk to existing franchisees about whether or not their franchise has been a financial success. If you are considering a franchise that is new, you should ask to see financial records for the pilot operation.Where the franchisor is a limited company in the UK, you can request its latest published accounts - for a nominal fee - from Companies House. However, be aware that a company has nine months to file its accounts from the end of its financial year. This means the accounting information publicly available through Companies House could be out of date. You may need to ask a franchisor to confirm there has not been any deterioration in its financial position since the accounts were prepared.If the franchisor is an overseas business, it may well be that they have had to comply with certain disclosure requirements. This may include providing detailed financial information in relation to the franchisor. Requesting a copy of the disclosure document would give you detailed information on the franchisor’s financial track record.Finally, it is possible to carry out credit checks on companies through global business databases such as Dun & Bradstreet. Requesting a report on a company will cost around £15 and sets out historical financial data and information on the risk rating of that company. If you require further information regarding any financial facts relating to a franchise business you should speak to an accountant.
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