Item 21 - FINANCIAL STATEMENTS

In Item 21, you can review copies of the franchisors' financial statements for past three years. Specifically, this Item lets you examine the franchisor's ability to meet its long-term debts and financial obligations.

Objective

  • Identify potential investment risks by examining the franchisor's overall financial situation.

Important Considerations

  • Look for the following items to see how they change from year to year:
    • How much cash do they have on hand?
    • Are they increasing in business revenue from year to year?
    • Do they have good spending habits?
    • How much debt do they have?
    • Is the debt going up or down?
    • What money is owed to them?
    • Are royalties and receivables going up or down?
    • Are officers paying in money to the company?
    • What did their expenses do in the last year?
    • What did net earnings do?

Item 20

Item 22