The FDD Review Checklist
Bring this to your Franchise Disclosure Document. It lists the exact things to verify in the eight items that carry the real risk, in reading order, most exposure first. It tells you what to confirm, not how much you will earn.
19item
1. The earnings claim
Item 19 · exposure 5/5 · $$$$$- An Item 19 exists at all (about a third of franchisors make none).
- It reports a median, not only an average.
- It states how many owners, and what percent, actually reached the figure.
- It says which units are counted, and whether closed or underperforming units are included.
- It distinguishes gross sales from net profit.
- It defines the time period, the sample size, and what costs are excluded.
21item
2. Franchisor financial health
Item 21 · exposure 4/5 · $$$$- Audited financial statements are included, not a summary.
- The auditor's opinion is clean, with no going-concern note.
- Net worth (stockholders' equity) is positive, not a deficit.
- Revenue comes mostly from royalties on operating units, not from selling franchises.
5-7items
3. What it really costs
Items 5-7 · exposure 4/5 · $$$$- The estimated initial investment is itemized, not hidden behind the word varies.
- Working capital (additional funds) covers a realistic period, not just three months.
- The estimate states what it excludes, such as your living expenses and loan payments.
- Every ongoing fee (royalty, marketing, technology) is listed with how it is calculated.
20item
4. Who stayed, who quit
Item 20 · exposure 4/5 · $$$$- The outlet tables show opened, closed, transferred, and reacquired counts.
- Closures and transfers are low relative to the total, not masked by net growth.
- The list of former franchisees and their contact information is present.
- You plan to call several former owners, not only the references the franchisor hands you.
3item
5. Litigation history
Item 3 · exposure 3/5 · $$$- You noted the direction: franchisees suing the franchisor matters more than the reverse.
- You noted the nature: earnings-claim, fraud, and misrepresentation cases are the ones to read closely.
- You noted whether the same allegation repeats across separate cases.
- You separated allegations (claims) from findings (rulings).
9item
6. The control you keep
Item 9 · exposure 3/5 · $$$- Required purchases from the franchisor or approved suppliers are listed.
- Transfer and renewal conditions are clear, not left to sole discretion.
- Any non-compete, with its length and area, is stated.
- Changes to standards come with notice, not sole discretion alone.
11item
7. Support promised
Item 11 · exposure 3/5 · $$$- Training is quantified: hours, days, and who pays for travel.
- Ongoing support uses the word will, not may.
- Opening assistance is committed, not optional.
- Any technology or marketing the franchisor provides is defined, not vague.
12item
8. Territory protection
Item 12 · exposure 3/5 · $$$- The territory is exclusive and defined in writing, by map or ZIP codes.
- The franchisor's reserved rights (internet, national accounts, other channels) are listed and bounded.
- There is a clear promise not to open or grant another unit inside your area.
- You know whether the exclusivity can be lost by missing performance targets.
9final
9. Before you sign
Across every item- You have the complete FDD, all 23 items plus exhibits, issued within the last 12 months.
- You received it at least 14 calendar days before signing anything or paying any money.
- An independent franchise attorney has reviewed the franchise agreement.
- An independent accountant has reviewed the costs and the franchisor's financials.
- You have read all eight chapters of the guide for the franchise in front of you.