Franchise vs independent: questions, answered

A disclosure document franchisors must give prospective franchisees under the FTC Franchise Rule (16 CFR Part 436), unless an exemption applies. It has 23 items covering the franchisor, fees, investment, territory, obligations, renewal and exit, any earnings claims, franchisee lists and financial statements.

The franchisor must give you its current disclosure document at least 14 calendar days before you sign a binding agreement or pay the franchisor or an affiliate in connection with the sale.

Initial fees in Item 5, other fees such as royalties in Item 6, and the estimated initial investment in Item 7.

Earnings claims belong in Item 19. If a franchisor makes financial performance representations, they must be in Item 19 with a reasonable basis; if it makes none, the FDD must say so. The rule allows two narrow additions: the actual records of an existing outlet you are considering buying, and written information that supplements Item 19 for a particular location or situation. Treat any other figures with caution.

Only if Item 12 says so. Read what is and is not protected, and whether you can lose territory.

No. Your agency needs whatever license or registration your state requires either way. Confirm requirements with your state agency.

It depends on Item 17 and the agreement, which often limit competing after you leave. Ask a franchise attorney before you sign.

Fees differ by brand and change, and we have not verified any franchise’s current FDD. Read each franchisor’s own disclosure document instead.

Yes. Have a franchise attorney review the agreement and an accountant review the costs before you sign or pay.

Home Care Agency Blueprint, which sells help to people starting independent agencies. We say so on every page so you can weigh our perspective.