Buying a Franchise: How to Check Turnover Forecasts Before You Sign

A persuasive turnover forecast can make joining a franchise network look attractive. But a forecast is neither proof of success nor a guarantee. If you are considering buying a franchise in Germany, check where the figures come from, whether they fit your proposed location and what information is still missing before you sign. This guide explains how to turn a sales document into a reliable basis for your decision.

1. Understand the legal framework for disclosure

Germany has no specific franchise law, no legally required standard disclosure document and no national franchise register. Nor is there a requirement to register a franchise agreement. The main rules come from general civil law under the German Civil Code (Bürgerliches Gesetzbuch, or BGB), alongside commercial law and other provisions, depending on the agreement’s terms.

For turnover forecasts, the key rules are the pre-contractual duties to disclose information and have regard to the other party’s interests. These arise in particular from sections 311(2) and 241(2) BGB, and the principle of good faith under section 242 BGB. Their precise scope is shaped by case law and depends on the circumstances.

This does not mean that a franchisor must provide every prospective franchisee with an individual profitability calculation. However, any financial information or forecasts supplied must not mislead through false data, the omission of material facts or a misleading presentation. Pay particular attention to identifiable uncertainties and the basis of any forecast.

There is no fixed statutory two-week disclosure period. Information must be supplied early enough to allow a reasonable review before you make a binding commitment. A binding preliminary agreement may also be relevant here. Allow enough time for follow-up questions and independent advice.

2. Establish where the figures come from

Start by asking for a clear distinction between actual results, averages and planning assumptions. A statement such as “Our franchisees achieve this turnover” is of little use without context.

Ask for the following details for each key figure:

• Data set: How many businesses were included, and what period do the figures cover?
• Type of operation: Are these the franchisor’s own pilot operations or independently run franchise businesses?
• Stage of development: Do the figures include newly opened businesses, or only established locations?
• Selection: Were closed or poorly performing businesses included?
• Presentation: Is turnover stated excluding or including VAT? Which costs have been deducted from the reported profit figure?

Do not settle for seeing only a top-performing business. The spread of results and clearly defined comparison groups are more informative. An average can conceal the fact that a few exceptionally successful locations outweigh many weaker ones.

This does not automatically give you a general right to all internal documents or unredacted data relating to other franchisees. Anonymised analyses may offer a practical solution. If important underlying information still cannot be verified, treat that as an unresolved uncertainty in your investment decision.

3. Test the forecast against your location

Even verified figures from an existing business cannot simply be applied unchanged to another location. Consider the differences that could affect your future turnover: catchment area, competition, visibility, accessibility, opening hours, staff availability and local demand.

Break the forecast down into its calculations. For a business relying on passing trade, this might be: relevant visitor numbers × purchase conversion rate × average transaction value excluding VAT × trading days. For service businesses, available appointments, utilisation, cancellations and average revenue per job excluding VAT are often more useful.

Every material assumption needs a clear justification. Ask, for example, whether visitor numbers were actually measured at your proposed location or simply taken from another business. Also check whether the premises, staff and equipment can realistically serve the projected number of customers.

Where possible, speak to several existing franchisees in comparable locations. Ask specifically about the start-up period, seasonal fluctuations and differences between actual performance and the original plan. These conversations encourage knowledge-sharing within the franchise network, but they do not replace your own due diligence.

4. Move from turnover to financial viability

High turnover does not automatically mean sufficient profit or available cash. With support from a tax adviser or financial adviser, turn the forecast into monthly profit and cash-flow projections.

Include, in particular, stock or material costs, staffing, rent, ongoing franchise and marketing fees, and mandatory software, training and local advertising. For every turnover-based fee, check the calculation basis specified in the agreement and any minimum charges.

Add capital expenditure, deposits, initial stock, taxes and loan repayments. Repayments of loan principal reduce available cash even though they are not operating expenses when calculating profit. You must also be able to cover your personal living costs.

Run a cautious scenario too: what happens if opening is delayed, the customer base grows more slowly or staffing costs are higher? Use this to establish your funding needs. If the business can only meet its payment obligations when every optimistic assumption is fulfilled, the plan leaves too little room for manoeuvre.

5. Document the answers and safeguard your decision

Keep a checklist with four columns: statement, supporting evidence, outstanding question and significance for your decision. Save presentations, calculations and emails with dates and version details. Confirm important verbal explanations in writing and ask for corrections if you have misunderstood anything.

Before signing, have the agreement and its schedules checked to ensure they reflect the fees and services discussed. A forecast does not become a turnover guarantee simply because it is in writing. Equally, a blanket warning about business risk does not automatically remove responsibility for misleading information.

A culpable breach of disclosure duties may, in particular, give rise to a claim for damages under section 280(1), read together with sections 311(2) and 241(2) BGB. Whether the legal requirements are met must be assessed case by case.

Practical takeaway: Sign only when you can understand and verify the sources of the data, the assumptions about your location and your cash-flow requirements. Significant unresolved figures are a reason to ask questions and wait—not to rush into signing.