FDD field guide
Read the disclosure like an owner.
The FDD is not a scorecard. It is a map of the claims, obligations, economics and people you still need to verify.
Start with Items 5, 6 and 7
Item 5 covers initial fees paid to the franchisor. Item 6 covers ongoing and other fees. Item 7 estimates the total initial investment, usually as a range. Compare its assumptions with real quotes and your market.
Use Item 19 carefully
Item 19 is the only place a franchisor may make a financial performance representation in the FDD. It may show gross sales, selected expenses, quartiles or job-level data—or say the franchisor does not make a representation. Check the time period, included units, exclusions, sample size and metric definition.
Trace system health in Item 20
Review openings, closures, transfers, terminations and reacquisitions across several years. Then call a balanced sample of current and former franchisees listed in the exhibits.
Read the agreement, not just the summary
Items 8, 9, 11, 12, 15, 16 and 17 frame suppliers, obligations, support, territory, management requirements, restrictions and renewal or termination. The attached franchise agreement controls the legal relationship.
Ten questions for validation calls
- What did your all-in opening cost become?
- How long until monthly cash flow turned positive?
- How much working capital did you actually need?
- What does the franchisor do exceptionally well?
- Where did support fall short?
- How reliable is lead generation?
- What is hardest to hire or retain?
- What would you change about your territory?
- Would you make the same decision again?
- What should I verify before signing?