Reading the disclosure document alongside the contract
Federal rules require franchisors to give prospective franchisees a franchise disclosure document a set period before signing or paying, and New York's timing rule can require delivery even earlier. The document describes the franchisor's history, litigation, fees, initial investment, financial statements, and lists of current and former franchisees. It may also include financial performance information, or say that none is provided. Compare the agreement against the disclosure document, because the binding obligations live in the agreement, and any promise a salesperson made outside those documents may be hard to rely on later. Federal regulators have warned franchisors about charging fees that the disclosure document does not reveal.
Terms that shape the investment
Look closely at the territory: whether it is exclusive, how it is defined, and whether the franchisor can sell online or open other channels inside it. Fees go beyond royalties to advertising contributions, technology charges, required supplier purchases, and remodel obligations that may arise mid-term. Personal guarantees are common and can put your own assets at stake if the business fails. Transfer, renewal, and termination provisions decide whether you can sell, how you can leave, and what you owe if you do. Post-termination noncompetes and the choice of law and forum for disputes should be read with an exit in mind, not just an opening.
What we cover in a review
Bring the disclosure document, the agreement and all its exhibits, any lease or site documents, and your business plan with projected costs. We review the terms that carry the most financial risk, explain which provisions franchisors in that system commonly negotiate, and suggest questions to put to the franchisor and to existing franchisees listed in the disclosure document. Talking to current and former operators is often the most revealing step. Where you plan to take several units or form an entity with partners, we also look at how the franchise documents fit with your own ownership agreement.
