Financial Management:

Explain your source and amount of initial equity capital.

Develop a monthly operating budget for first year.

Develop an expected return on investment and monthly cash flow for first year.

Provide projected income statements & balance sheets for a two year period. Discuss your break­even point.

Explain your personal balance sheet and method of compensation.

Discuss who will maintain your accounting records and how they will be kept.

Provide "what if" statements that address alternative approaches to any problem that may develop.

Operations:

Explain how business will be managed on a day-to-day basis.

Discuss hiring and personnel procedures.

Discuss insurance, lease or rent agreements, and issues pertinent to your business.

Account for equipment necessary to produce your products or services.

Account for production and delivery of products and services.

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Verify Claimed Earnings: Some franchisors may tell you how much you can earn if you invest in their franchise system or how current franchisees in their system are performing. Make sure you ask for and obtain written substantiation for any income projections, or income or profit claims. If franchisor does not have required substantiation, or refuses to provide it to you, consider its claims to be suspect.

Do Not Be Rushed: You may be told that franchisor's offering is limited, that there is only one territory left, or that this is a one-time reduced franchise sales price. Do not feel pressured to make any commitment. Legitimate franchisors expect you to compare deals. A good deal today should be available tomorrow

Check Documentation: Do not sign any contract or make any payment until you have opportunity to investigate franchisor's offering thoroughly Study disclosure document. Because investing in a franchise can entail a significant investment, you should have a lawyer review disclosure document and franchise contract and have an accountant review company's financial disclosures.

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