Not all franchises are created equal — and some are outright fraudulent. The franchise model is powerful when it works, but it's also a structure that bad actors exploit. High-pressure sales tactics, misleading financial projections, and buried red flags in the FDD are all warning signs. This guide walks through the red flags in franchise disclosure documents, sales tactics that signal trouble, and how to conduct real due diligence before you invest.
The Bottom Line
Franchise fraud is real, and the FDD is where the truth is buried. High-pressure sales tactics, missing Item 19 data, high turnover rates, and litigation history are all red flags. The best defense is independent due diligence — talk to current and former franchisees, review the FDD with an attorney, and never rely on the franchisor's projections alone. The FDD tells you what the franchisor is legally required to disclose — not what they want you to know.