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.


  • 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?