Before making a final decision regarding a specific franchise opportunity there are some items that need to be included in your due diligence checklist. However, these items don't always receive the attention they deserve. They will require some extra work on your part but it will be well worth it. All of these items relate to the financial aspect of the franchise operation. If you follow these tips you'll have a higher probability of operating a successful franchise.

• The Item 19 Disclosure- Its reported that about 30% of franchisors do an earnings or revenue disclosure in their Franchise Disclosure Document or FDD. Known as an "Earnings Claim" this information can be the source of useful information. Conversely, the information might not tell you as much as you need to know. If the franchisor makes an Earning Claim be sure that your accountant reviews the numbers to verify their value. If the franchisor doesn't make an Earnings Claim; then ask the franchisor why they don't!
• Gross Margin Data-You'll want to obtain as much detail as you can regarding the composition of the gross margin. You should be able to gather this information from the franchisor and current and former franchisees. This information will be very useful, as you'll soon see.
• Franchise Operating Expenses- Under the revised FDD regulations the franchisor can disclose expense data to prospective franchisees. This information should include key operating expenses.You'll want to verify this information when you speak with current and former franchisees. Be sure to ask them if any unanticipated expenses arose. 
• Calculate Unit Revenue or Transaction Size- If you can identify the average unit sales or gross margin per transaction then you'll be able to translate that into the number of customers or clients you'll need to cover your expenses and earn a profit. Armed with this information your next step is to relate this to your territory or market. For example, if you know that the average customer transaction is $20 and you need $5,000 in revenues per week@ your required GM  to cover your expenses you'll need an average of 250 customers per week. This is a simple excercise, however, having this information is critical. Ask yourself; can I expect to generate this number of customers per week?
• Do a Break-Even Analysis- Its very important that you do a BE analysis using the  information you've gathered from the previous steps. If you don't do a BE you won't know what's needed to be successful. Here is a link to a BE calculator tool that you can use.

Recall the famous quote from Alice in Wonderland:

"Which road do I take?" (Alice)

"Where do you want to go?"

"I don't know," Alice answered.

"Then, said the cat, it doesn't matter."

"If you don't know where you are going, any road will get you there." (Cheshire Cat)