Some franchisors, including some of the biggest, have failed to accurately disclose in their Franchise Disclosure Documents a key indicator of the health of a franchise system: the system’s annual unit growth. This can make it difficult for prospective franchisees to assess the likely success of a franchise before investing.
Growth in franchised units can be calculated in two ways from the numbers in Item 20 of the FDD, and those two methods failed to match in at least one year’s FDD for 7-Eleven, Dunkin’ Donuts, Subway and Little Caesars, among the 310 franchised systems with inaccurate data analyzed by FranchiseGrade.com. That’s 12.8% of systems
of the over 2,400 systems reviewed by the research firm.
Highlighting the accuracy problem, Blue Mau Mau
recently reported that franchisor Famous Dave’s of America disclosed three different numbers
for the count of franchised units in its system.
While such errors may seem harmless, the erroneous reporting of unit growth means that some franchisors are providing a confusing picture of the health and growth of their systems.
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