Presenting franchise results without promising profitability

When you turn an existing business into a franchise network, prospective franchisees want to know what it could deliver financially. Your own results provide important evidence, but they are not a promise of anyone else’s future profitability. Establish a clear process for deciding which financial information you share, how you explain it and who is responsible for keeping it up to date.

1. Distinguish historical results from future possibilities

Start by sorting all financial material used in presentations, meetings and mailings. Label each item according to what it actually shows:

• Historical results: recorded revenue and costs for a specific business and period.
• Adjusted comparative data: historical figures with explicit adjustments to make comparisons easier.
• Forecast or illustrative calculation: a possible future outcome based on stated assumptions.

Do not mix these categories in the same chart without clear explanations. For example, an actual operating profit from your own outlet does not become a documented franchisee result simply because you deduct the proposed franchise fee.

Also explain what terms such as “profit”, “surplus” and “owner’s pay” mean in your material. A surplus before payment for the owner’s work tells a different story from a profit after the equivalent staffing cost. Readers should not have to guess which costs are included.

Use wording such as “results from our own outlet during the stated period” rather than “this is how much you will earn”. The first describes the evidence. The second risks being understood as a personal promise.

2. Explain the context behind the figures

Prepare a short fact sheet for each outlet whose results you use. Describe how long it has been operating, its location, opening hours, staffing and which products or services it actually sold during the period. Also note whether it had an established customer base from the outset.

A founder-led business may have advantages that a new franchisee does not. The founder might have personal customer relationships, favourable rent under an older lease, or support from staff whose costs are recorded in another company. These circumstances need to be made clear for the comparison to be useful.

Use the following process:

1. Take the results from verifiable financial records.
2. Describe circumstances that affected the period, such as a temporary closure or an unusually large one-off order.
3. Show any adjustments separately, with an explanation.
4. List the differences between your own outlet and a planned franchise outlet.

Do not select only the best month and present it as normal trading. If you show several outlets, make clear how they were selected and which periods are covered, even when this makes the comparison less attractive.

Do you have no franchisees yet? Say so explicitly. Results from company-owned outlets may be relevant, but they do not, in themselves, show how the franchise arrangement works financially for independent business owners in the network.

3. Put the information in the right legal context

Sweden does not have comprehensive franchise-specific legislation. However, the Act (2006:484) on the Duty of Franchisors to Provide Information applies. Under Section 3, franchisors must provide clear, understandable written information in good time before an agreement is entered into, explaining what the agreement entails and any other matters that need to be disclosed in the circumstances.

The minimum information includes payments to the franchisor and other financial terms. The Act does not, however, prescribe a standardised profit forecast or require the franchisor to guarantee profitability. You should therefore distinguish between information that must be disclosed and any financial presentations you choose to provide voluntarily.

General rules, including Sweden’s Contracts Act and Marketing Act, may also affect how financial claims are assessed. A blanket disclaimer that “results may vary” is not an adequate way to address a presentation that otherwise gives a misleading impression.

Ask a legal adviser to review how your claims about results, disclaimers and contractual terms work together. At the same time, have someone with accounting expertise check the figures. Legal review does not replace financial checks, and accurate figures do not guarantee that the presentation gives a fair overall impression.

4. Manage what is said in meetings and mailings

Appoint someone to take responsibility for a shared, version-controlled set of financial results. Include the date, reporting period, source and next scheduled review. Archive older versions so that you can establish which material a particular candidate received.

Give everyone presenting the franchise opportunity the same instructions. They should be able to explain the material, but must not add their own promises about payback periods, sales or personal income. If a question cannot be answered using the available facts, provide a written response once the information has been checked.

After a financial discussion, you can summarise the information presented, the assumptions discussed and any outstanding questions. Encourage the candidate to review the material with their own adviser. This does not replace your responsibility to provide information, but it helps both parties identify misunderstandings before entering into an agreement.

Practical takeaway: Prepare a traceable set of financial results before you start presenting the franchise opportunity. Clearly label actual results, adjustments and forecasts — and always explain the circumstances behind the figures.