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I’ve received the franchise disclosure document. What are the questions I should ask the franchisor?
John Pratt writes:
In the UK, there is no legal requirement for a franchisor to provide any disclosure document, although for those franchisors who are members of the British Franchise Association, franchisors are required to provide more limited disclosure on various elements, such as the business and financial position of the franchisor, the people involved, the franchise proposition and franchisees.
It is really important that you look at that information carefully to ensure that there is nothing in the information that surprises you. You would need to focus, in particular, to any forecasts that have been provided, so that you are absolutely clear of the basis of any such forecasts. They need to be based on the average performance of franchisees and not simply the 10 best performing franchisees.
You should also be provided with a full list of franchisees. It is a good thing for any franchisor to provide a disclosure document, so if you receive one, that is a good start – provided the information contained in the disclosure document is true and, if it is not, untruthful comments could well amount to a misrepresentation in respect of which you would be able to bring a claim.
John Pratt is senior partner at specialist franchise firm Hamilton Pratt and has advised franchisors for over 25 years.
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