Franchisee Validation Call Script

Method notes: how the script is organized and who to call

The script has 32 questions in six sections, each with a write-in line so you can compare answers across calls. The topics track what the FTC'sConsumer's Guide to Buying a Franchisesays franchisees can tell you. For owners in business just over a year, the Guide lists total investment, whether they opened in a reasonable time, satisfaction with training, opening assistance and advertising, ongoing help, and whether they have broken even. For owners at five years, it adds how long break-even took, whether the franchisor delivers what it promised, problems with the franchisor, whether they would invest in another outlet, and the cost and quality of required purchases. For former franchisees, it adds why they left, how long they operated, and whether they broke even. Pick the sections that fit the person you have on the phone, and ask every caller of a type the same questions.

The FTC Franchise Rule,16 CFR 436.5(t), decides whose numbers you get.

• Current franchisees. The FDD must list every current franchisee with the address and phone number of each outlet. As an alternative it may list all franchised outlets in your state, and if those total fewer than 100, outlets in contiguous states and then the next closest states until at least 100 are listed.
• Former franchisees. It must list every franchisee whose outlet was terminated, canceled, not renewed, or otherwise ceased under the agreement during the most recently completed fiscal year, or who has not communicated with the franchisor within 10 weeks of the issuance date. That is one fiscal year, while Item 20's status tables cover three. An owner who left two years ago shows up in the tables but not on the contact list, so ask the franchisor whether it can help you reach that person, and note how it responds.
• Confidentiality. If franchisees signed confidentiality clauses in the last three fiscal years, the FDD must say that some current and former franchisees sign provisions restricting their ability to speak openly. The Guide makes the same point: some former franchisees may have signed agreements that prevent them from talking with you.
• Referral lists. The Guide notes that some franchisors give a separate reference list, and suggests contacting a number of franchisees from the disclosure document and some from the separate list. Call both, and compare.

Worked example: one Item 19 question, eight calls

The first question in the revenue section asks whether the franchisor gave an Item 19 representation and how the caller's results compared. This example uses a made-up Item 19, with no dollar figures, only the sample counts the rule requires. Nothing here describes a real brand.

Hypothetical Item 19 sample: 60 franchised outlets existed in the period. 45 of them had been open the full year (the described characteristic). Data from all 45 were used. 20 of the 45 met or exceeded the stated average.

• The share that reached the stated average is 20 / 45 = 44.4 percent, so most outlets in the sample did not reach it.
• The rule requires the franchisor to state the total number of outlets, the number with the described characteristics, the number whose data were used, and the number and percent that reached or beat the stated result. That is how you can do this arithmetic at all.
• 15 outlets (60 - 45) are outside the sample. Ask the franchisor which ones and why, since newer or struggling outlets are the obvious candidates.

Now use the number on calls. If callers were a fair cross-section, you would expect roughly 44 percent of them to say they were at or above the stated figure: 0.444 x 8 = about 3.6 of 8 callers. If eight of eight say they beat it, the likelier explanation is that you were handed a favorable list, not that the figure is low. Record "above" or "below" for every caller in the write-in line, and route any dollar answers to your accountant against Item 19, since no single owner's numbers are a promise.

A second cross-check uses Item 11, which must state the typical time from signing (or first payment) to opening and describe what can affect it, such as lease negotiation, financing, permits, zoning, weather, and delayed equipment. Suppose the hypothetical FDD says 6 to 9 months and three callers answer 8, 14, and 7 months. The 14 falls outside the stated range, so ask that caller what caused it, and whether the franchisor's site approval or equipment delivery was part of it.

Sourced analysis: reading what you hear

• Why call at all. The FTC's Guide says talking to current and former franchisees may be the most reliable way to verify the franchisor's claims, and that some current franchisees may be reluctant to talk if they are having problems, in which case you should try others on the list. Reluctance is worth noting, but it is not proof of a problem.
• Sample the risk, not just the successes. A fact sheet from the North American Securities Administrators Association (NASAA), a 2011 document hosted on theIllinois Attorney General's site, tells buyers to contact as many current and terminated franchisees as they can, to find out whether a high number have closed, transferred, or never opened, and to be very skeptical if experienced franchisees are unhappy or cannot be reached.
• Confidentiality clauses. In July 2024 the FTC issued apolicy statementsaying franchise agreements may not restrict franchisees' communications with the FTC or any other state or federal law enforcer or regulator about potential law violations. A footnote in that statement says it is focused on clauses that restrict communications with law enforcers and regulators, and is distinct from the Commission's earlier Franchise Rule analysis of clauses that could inhibit prospective franchisees' due diligence. So a caller who says "I can't discuss that" may be bound by a clause the statement does not reach. Ask "what are you free to tell me?" and write down the answer. This is a policy statement, not legal advice, so take any clause you find to your attorney.
• Turn answers into a decision. After eight to ten calls, tally the answers by question, not by caller: how many were at or above Item 19, how many opened within Item 11's stated time, how many would buy again. A pattern across callers is worth raising with the franchisor and your attorney. A single dramatic story, good or bad, is not a pattern.

This page is educational and is not legal or financial advice. Review the FDD and franchise agreement with a franchise attorney licensed in your state and a qualified accountant before you sign anything or pay any money.