Part 4 of BlastPoint’s IFA Roundtable Roundup Series: Am I Using Item 19 to its Fullest Advantage?
Financial Performance Representations (FPRs), otherwise known as Item 19 of your Franchise Disclosure Document, may indeed add time-consuming paperwork to a pile of to-do’s that’s already making you want to pull your hair out.
But these days, not including Item 19 could raise a red flag for prospective franchisees, according to this interview with franchise attorney Kitt Shipe.
Why? Because today’s savvy prospects are doing their homework, and they’re studying companies’ Item 19’s carefully as they decide what kind of franchise would be a good fit for them.
What exactly does Item 19 do?
“FPRs can give you a clearer picture of what the path to profitability will be like when you buy a franchise, even though they shouldn’t be taken as a predictor of what will occur,” says FranchiseDirect.com.
If Item 19 is missing from franchisor documentation, then, potential franchisees could view that at as an attempt to conceal lousy performance figures. Which happens to be one legitimate reason plenty of franchisors do, in fact, opt out of using them.
But, as FranchiseDirect.com explains, “A franchisor that does not provide an Item 19 disclosure is prohibited from discussing financial performance numbers with prospective franchisees, including the answer to the popular question, ‘How much will I make?’ Instead, prospective franchisees must look to industry information and other franchisees that are already in the system for this information, and not the franchisor.”
This ought to be motivation enough to plant your own stake in the ground. Don’t let someone else, outside of your control, provide company information for you. Give your prospects accurate, current, reliable information straight from a trusted source: You.