Looking for “Red Flags”
Sometimes people think accumulating lots of Franchise Disclosure Documents equates to having more knowledge about franchises, enough knowledge to make a judgment among franchise businesses. That’s simply not the case.
The Franchise Disclosure Document does not tell you how the franchise competes against its competitors, who the competitors are and other qualitative aspects of the business. Instead, the Franchise Disclosure Document exclusively focuses on the factual information about the franchisor and the proposed relationship between the franchisor and franchisee.
Perhaps most important, the Franchise Disclosure Document reveals any red flags you should be aware of before making a judgment on the attractiveness of a franchise. The document helps you see past the flashy marketing and sales and allows you to refocus on an analytical view of the franchisor and the related opportunity.