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A Look at a Franchise Offering Circular from 1984

by Ed Teixeira

Have you ever wondered how much franchise disclosure has changed over the years? I did, so I read the FOC from the first franchisor I worked for 30 years ago.

I haven't had the urge to take a look back in time but while cleaning out some files I came across a FOC dated 12/84. As I started to turn the pages, I noticed how much things have changed over the past number of years. The first thing that struck me was how short the document was. However, that aside, there were numerous sections and tables that we take for granted in today's FDD which didn't exist 30 years ago.

The 23 items haven't changed very much in terms of the titles, but what have changed are the tables that appear in the FDD that didn't exist years ago. Item 7, franchisees initial investment consisted of a narrative that contained some total investment figures without much detail. There were no item 20 tables but instead franchisee statistics for a one year period. As I read through the document I saw its lack of information compared to today's typical FDD. There was no list of current and terminated franchisees with contact information.

I was struck by how much more information today's franchise candidate is given. I would like to have some statistics from the past 20-30 years regarding franchisee turnover and failures and compare them to today's data. Unfortunately that data isn't available. If today's FDD has the same amount of information as the FOC from years ago, would things change very much? I would say no.

My opinion is that despite the large amount of information available to prospective franchisees and the resources available on the Internet many of the prospective franchisees still fail to perform adequate due diligence. Whether it's a case of some individuals not investing the time and money, investigating franchise opportunities or the fact that there will always be a certain percentage of franchisees that fail, we may never know the true answer. Suffice it to say that today's franchise candidate has access to much more information than their predecessors, there is an opportunity for more analysis and evaluation of the franchise than there was available to previous franchisees.

2015 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow.com and Chief Operating Officer, FranchiseGrade.com. He is a former franchise executive and franchisee. He can be contacted at 631-246-5782 or at  franchiseknowhow@gmail.com

 

 

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