What information should a franchise prospectus contain?
In franchising terms, the prospectus is simply a marketing brochure that outlines the opportunity on offer. It is often the first document that a potential franchisee will receive after making their initial enquiry from an advert, website or exhibition. Its purpose is to paint the picture of what life might be like as a franchisee of the system, so that the enquirer can decide if they want to investigate further.
Not all enquirers will be sent a prospectus. If the franchisor’s initial screening of the enquiry, either from the information entered on a website form or elicited from a telephone call, suggests that the applicant will not be suitable then there is no point taking the matter further.
The brochure will often start with some history of the business and how long it has been operating through franchising. It will then explain what a franchised outlet does and what the franchisee will do within it. There should also be some information about the market and the prospects for this system within that market.
An application for further information opens the door to the next stage of the recruitment process, which will probably be a meeting at the franchisor’s premises. What the prospectus should not contain is anything in the way of detailed financial information - that comes later once the parties know each other better.
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