What type of financial information must be disclosed to potential franchisees?

Potential franchisees in California must be provided with a Franchise Disclosure Document (FDD). This document includes all the relevant information about the franchise, including the financial details. The franchisee must receive the FDD at least 14 days before signing a franchise agreement. The FDD should include financial details such as the initial investment amount, the estimated start-up costs, the estimated total costs, the estimated ongoing costs, the estimated break-even time period, information about any investments the franchisor has made in the franchise, and the projected earnings. It should also include the franchisor’s audited financial statements, which should include the franchisor’s most recent balance sheet, income statement, and statement of retained earnings. This is to ensure that the franchisor has adequate funds to pay any debts. The FDD should also include information about the franchisor’s financial performance, such as the sales and profits of existing franchises. This is to help potential franchisees understand their investment risk and the returns they can potentially expect. Finally, the FDD should include information about the franchisor’s ability to provide ongoing financial support to its franchisees, to cover any shortages in their initial investments. This is to provide potential franchisees with some assurance that the franchisor is able and willing to support them in their venture.

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What type of financial information must be disclosed to potential franchisees?

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