3 Tips for Reading a Franchise Disclosure Document

For anyone exploring a senior care Franchise opportunity like Right at Home, doing your homework is essential. One of the most important tools you’ll use during this process is the Franchise Disclosure Document (FDD).

By law, franchisors must include three years of financial statements in the FDD. These documents offer valuable insight into the company’s financial health, its revenue generation, and the sustainability of its business model over time.

At first glance, financial statements can feel overwhelming. But you don’t need to be an expert to start making sense of them. When you understand the story behind the numbers, and pair that with guidance from a qualified accountant or financial advisor, you’ll be in a much stronger position to evaluate the opportunity. The FDD is designed to provide transparency, help you validate performance claims, understand growth trends, and ask more informed questions.

Here are three key areas to focus on as you review an FDD:

1. Understand How the Franchisor Generates Revenue

A good place to start is by understanding how the Franchisor makes money. Most Franchise systems rely on two primary revenue streams:

• Initial Franchise fees (one-time payments)
• Ongoing royalties (typically a percentage of Franchisee revenue)

As you review the financial statements, look at how much revenue comes from each of these sources. A higher percentage from Franchise fees may point to a Brand that’s growing quickly or still expanding. On the other hand, a System that generates most of its revenue from royalties often reflects a more established Network with consistent performance across locations.

Neither structure is inherently better; it just gives you context. The key is to use this information to guide your thinking and conversations. For example:

• Could the Franchisor sustain itself on royalties alone?
• Is growth driven more by new Franchise sales than by existing unit performance?
• How closely tied is the Franchisor’s success to the success of its franchisees?

These are the types of questions that can help you better understand the Brand’s priorities and long-term stability.

2. Analyze System-Wide Sales and Average Unit Performance

Another helpful way to evaluate a Franchise is by looking at overall System performance.

While not always presented as a single figure, you can estimate system-wide sales and average unit performance using a few sections of the FDD:

• Item 6: Royalty fees
• Item 20: Number of Franchise locations
• Financial Statements: Total royalty revenue

By connecting these dots, you can get a general sense of how the System is performing as a whole. This can help you spot trends, compare performance across Franchise systems, and better understand what drives revenue at the unit level.

Keep in mind that these numbers are just one piece of the puzzle, but they’re a useful starting point for deeper conversations during your discovery process.

3. Review Financial Statement Footnotes

One of the most overlooked sections of the FDD is the footnotes in the financial statements, but this is often where some of the most valuable insights live.

Footnotes can provide important context, including:

• Lease obligations or major overhead expenses
• Executive compensation or company perks
• Legal matters, such as pending lawsuits or settlements
• Financial risks or contingent liabilities

These details help paint a more complete picture of how the Franchisor operates behind the scenes. They can also highlight potential risks and give you a better sense of how the company manages its resources.

Taking the time to read this section carefully can make a big difference in how well you understand the opportunity.

Final Thoughts

Reviewing an FDD isn’t just about checking a box; it’s your opportunity to really understand the foundation of the Franchise you’re considering.

For those exploring a Right at Home Franchise, getting comfortable with the financial side of the business can help you ask more thoughtful questions, validate what you’re hearing, and move forward with greater confidence.

And remember, numbers are just the beginning. Real value comes from what you do with them. You can use your insights to guide conversations with the Franchisor, connect with current franchisees, and explore how the System supports owners over the long term.

When you combine financial understanding with real-world perspectives, you’ll be better equipped to make a smart, informed decision, one that aligns with both your goals and your purpose.