Item 21: Financial Statements
Content: This section includes balance sheets covering the past two years and income statements for the past three years. These “financial statements (for the franchisor) must be in accordance with generally accepted accounting principles.”
Purpose: The obvious purpose of this section is to give the franchise prospect a clear picture of the solvency of the franchisor.
Tips & Advice: Some people think these may be the financial statements of the individual franchisees, but they are not. These are simply the audited financial statements of the franchisor for the past two to three years. If you do not have a background in finance and/or you do not clearly understand the statements, this is an area you may want a trusted advisor to examine.