What is one way to gather sample financial results for franchises when the franchisor refuses to make optional financial disclosures in their UFOC? Check out the classified ads of businesses for sale. While the classified ads will generally disclose very basic and very vague financial information, such as annual sales and net income or cash flow, you will start to get a picture of the going valuations and metrics used (such as a multiple of earnings before income, taxes, depreciation and amortization; or a multiple of free cash flow), all of which will help you understand the financial models and drivers for the business. The financial disclosures in classified ads should be taken with a grain of salt. Why? You need to understand accounting and finance, or hire someone to help you with the valuation and explain the tax and valuation factors used in determining what type of free cash flow and return on your invested capital and time you can expect to reap. You also need to understand finance to know if you are comparing apples to apples. For example, all of these will make a huge difference in what the valuation means to you: Seller’s Loan payments and interest rates Lease payments Upcoming or postponed capital improvements Wages per employee, total wages per day Wages and distributions paid to the owner, if any Competition near location (knowing that there are several competitors in the mall is better, because if there are no competitors you know that sales will mostly drop when a competitors moves in) Your(buyer’s) financing options and interest rates Expenditures for accounting/legal (did they owner do their own accounting, or pay an accountant, what will you do?) Cash/theft rates Franchise renewals – how soon before the franchise agreement expires, and will there be required remodeling …

zpizza, a California Pizza Kitchen-light concept, has store sales average of $550,000. Lenny’s Subs is up to 700 franchises granted, still trailing Jimmy John’s grants of 1,000+ Meet the new U.K. Master Franchisee of Auntie Anne’s Panera Bread’s new design (Nice!):

I have close friends in the pretzel and snack-food business (and worked in the snack food industry for a short time), so I think I can speak from an especially knowledgeable perspective on this. Stores like Auntie Anne’s, We’re Rolling Pretzel Company, Pretzel Time (by Mrs. Fields), and Wetzel’s Pretzels must have some of the highest margins in the QSR business. The dough is literally a few pennies per serving, if that. The seasoning and butter is another few pennies, and your selling the product for almost $2 each. I’m sure the franchisors significantly increase the cost of dough and supplies force margins more inline with the typical mall store. Fresh pretzel businesses need very little square footage, and can often be served from a kiosk. They have the added advantage of smell in a mall, drawing people in with the scent of fresh baked buttery bread (OK, can you tell I love soft pretzels?). Most malls already have at least two pretzel franchises, but some do not. Depending on the rent, storefronts along a busy downtown street can capture enough of the afternoon foot-traffic to possibly turn a profit. Let’s look at some fees charged by franchisors: Pretzel Time: Initial Franchise Fee: $25,000 Ongoing Royalties: 7% of Gross Sales Advertising Fee: 1-3% of Gross Sales Initial Training Fee: No charge for first two individuals Total Estimated Initial Investment: $107,000 – $238,500 Wetzel’s Pretzels: Initial Franchise Fee: $30,000 Ongoing Royalties: 6% of Gross Sales Advertising Fee: 1% of Gross Sales Initial Training Fee: No charge for first two individuals Total Estimated Initial Investment: $102,000 – $211,000 Auntie Anne’s: Initial Franchise Fee: $30,000 Ongoing Royalties: 7% of Gross Sales (paid weekly) Regional Advisory Council Dues: $300/year Audit Fee: All expenses unless if receipts were understated by more than 2% Advertising …

VERY OUT OF DATE.  Do a search instead.  This was manually updated March 21, 2006 Companies Mentioned in Posts (likely incomplete):Automotive 1-800 RADIATORS Oil Butler Lube N’ Go On-Site-Lube Business & Home Services 1-800-WATER-DAMAGE Bartercard Garagetek Help-U-Sell Home Instead Homewatch Caregivers My Girl Friday PropertyGuys.com Sears Carpet & Upholstery Tax Centers of America Cleaning & Maintenance none Computer & Internet (some are listed in “Retail”) Screenz Food and Restaurant Arby’s Auntie Anne’s Blimpies Cheeburger Cheeburger Chipotle Dippin’ Dots Dream Dinners Doc Green’s Gourmet Salad Dominic’s of New York The Dugout Durango Grill Fazoli’s Fire of Brazil Fogo de Chao Goldstar Chili Jamba Juice Jerq’zine Krispy Kream Lenny’s Sub Shops Mauwi Wauwi Original Hamburger Stand Panaderia Taza Papa John’s Pizza Factory Pizza Patron Pretzel Time Quiznos Red Rock Chili San Francisco Soup Co Shane’s Rib Shack Skyline Chili Smoothie King Smotthie Planet Soup Nazi Steak-out Subway Submarina Sub Station II Super Suppers The Soup Box Supercuts Suzanne’s Kitchen We’re Rolling Pretzel Company Wetzel’s Pretzels Z Pizza Zoup! Fresh Soup Co (List all sub franchises) Health & Fitness Curves Liberty Fitness Home Building & Repair Services See “Business and Home Services” above Personnel & Staffing none Pet Retail and Services Camp Bow Wow Doody Calls The Pet Pantry Wag My Tail Interquest Detection Canines Pets Are Inn Retail Franchises Ace Hardware AuctionDrop Battery Plus Best Cuts GNC Educational Outfitters Fantastic Sams Fastframe Foot Solutions Friendly Computers Geeks on Call GNC Hair Cuttery Herman’s World of Sports Imagine This Sold Orbit Drop Play It Again Sports QuikDrop Roosters Men’s Grooming Centers Screenz Snips Its Sports Clips Stone Mountain Carpet Mill Tom’s Foods We the People Categories: eBay drop offs (generally) Hair Travel & Hotel none Industry Lists & Research 2004 Same Store Sales Growth of QSRs (quick service restaurants) Royalty and Advertising …