If the franchisor makes a financial performance representation - also called an FPR - in Item 19 of its FDD, you or the franchisor may furnish to a prospect a supplemental FPR about a particular location or variation.
For example, if the FPR in the FDD gives average sales and cost information for all outlets in a system and the prospect is considering an urban location, the supplemental FPR could focus on the sales and costs of just urban outlets in the system.
The supplemental FPR may be a document separate from the FDD, but must:
• be in writing
• explain the departure from the FPR in the FDD
• be prepared in the same manner as a standard FPR
• be furnished to the prospect.
If you would like to know if you can franchise your business, connect with me on LinkedIn and give me a call.
The supplemental FPR is one of the neatest tricks around - yet very few franchisors take full legal advantage.
Warren's sparse description of how to comply doesn't need amplification.
But consider throughly what Warren is showing you: "supplemental FPR could focus on the sales and costs of just urban outlets in the system."
Many franchisor in-house legal departments remain unaware of how to disclose the unit level economics of specific territories or geographical locations.
Strategically using a supplemental FPR with sophisticated franchise candidates helps the franchisor build trust with verifiable numbers.
This just provides greater evidence that Item 19 FPRs and supplemental FPRs are great sales tools giving franchisors with strong business models a way to compete with franchisors who don't.