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1Clear out junk files and repair common Windows errors2Scan for outdated or missing drivers - takes under a minute3Repair Windows errors before they cause bigger problemsBefore buying a U.S. restaurant franchise, review the entire current Franchise Disclosure Document (FDD), its exhibits and every proposed agreement—not just the fee summary or sales presentation. The FDD has 23 required items. The Federal Trade Commission says you must receive it at least 14 days before you are asked to sign a contract or pay the franchisor or its affiliate. Use that time to verify costs and claims, speak with current and former franchisees, and get independent legal and accounting advice.
Get the complete, current FDD and use the review period
Ask for the full FDD in a usable format, including every referenced exhibit and proposed agreement. Check its issue date and confirm that it is the version for the offer you are considering. If the franchisor changes the offer or contract, ask in writing what changed and when; timing requirements can depend on the circumstances and state law, so have counsel confirm what applies.
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The federal 14-day period is a minimum before you are asked to sign or pay the franchisor or its affiliate. Treat it as time to investigate, not as a deadline to rush through the paperwork. Keep a copy of the FDD, agreements, written answers, and the dated Item 23 receipt.
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What do Items 1–4 tell you about the company and its people?
Franchisor, affiliates, and executives
Item 1 describes the franchisor and relevant parent, predecessor, and affiliate businesses, and may identify licensing or permit requirements. Work out which legal entity will grant the franchise, provide support, receive payments, or carry other obligations. Item 2 identifies directors, principal officers, and key executives; examine their backgrounds and experience with franchise systems.
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Litigation and bankruptcy
Item 3 reports specified litigation and other legal history involving the franchisor and certain executives, including qualifying convictions, injunctions, and franchise-related lawsuits or settlements. Read what each matter concerns, its status, and any disclosed outcome. A lawsuit’s existence alone does not prove wrongdoing, but a pattern or unresolved issue may warrant questions for the company and your lawyer.
Item 4 concerns bankruptcy history. Read the actual disclosure and ask counsel to explain any reported proceeding and its relevance to the parties or business you are considering.
What will it cost to open and operate the restaurant?
Separate the initial fee from the total investment estimate
Item 5 states the initial franchise fee. Item 7 estimates total initial investment and breaks it into startup cost categories. They are not interchangeable: the franchise fee is one component, while the estimate is intended to cover a broader set of costs associated with opening. Neither is a universal restaurant cost figure or a guarantee that your location will open for that amount.
Test the Item 7 assumptions against the specific format and site you are considering: build-out, equipment, lease terms, opening schedule, and working capital. Identify the amounts, due dates, recipients, and any refund conditions for payments. Verify details in the FDD and contracts rather than relying on a sales presentation.
Build a location-specific operating model
Use the disclosures and your own location assumptions to model ongoing expenses as well as opening costs. Account for labor, occupancy, food and packaging, royalties, marketing contributions, technology or other required fees, debt service, taxes, and other expenses relevant to the proposed restaurant. An Item 19 sales figure, if provided, is not the same as owner income or profit.
What restrictions and support affect daily operations?
Purchases and suppliers
Item 8 covers restrictions on sources of products and services. Determine which ingredients, equipment, technology, distributors, or other goods and services you must obtain from designated sources. Ask whether the franchisor or an affiliate receives revenue from required purchases, and ask operators about actual supplier costs, quality, and reliability. The FDD and agreements—not assumptions based on the brand—establish the requirements for this offer.
Obligations, training, marketing, systems, and territory
Items 9–16 cover franchisee obligations, financing, training and assistance, advertising, computer systems, territory, intellectual property, and participation in the business. Read each disclosure alongside the corresponding agreement language. For a restaurant, pin down what training and opening assistance are promised, what advertising or technology costs recur, and what owner involvement the contract requires.
For Item 12, check whether the territory is exclusive and what exceptions may apply, including other channels, formats, or competing outlets. Ask how the written grant would work in the intended market; do not assume that a map or sales description creates protection broader than the agreement provides.
Are sales or earnings claims supported?
Item 19 may contain financial performance representations, such as sales or earnings claims, but a franchisor is not required by the Franchise Rule to provide them. If it makes such a claim, the claim must be in Item 19 and have a reasonable basis. Examine the supporting source, outlet population, reporting period, assumptions, limitations, and written substantiation. Ask whether the outlets and circumstances represented are comparable to the restaurant and location you may operate.
Treat a salesperson’s oral or written sales or earnings statement outside Item 19 as an unresolved issue. The FTC says such claims generally cannot be made outside Item 19, subject to narrow exceptions, including actual records for an existing outlet being considered. Ask for clarification in writing and have an adviser assess the claim before relying on it.
Item 18 addresses public figures’ participation in franchise sales. Review it to understand whether public figures are involved in promoting or selling the franchise; their involvement is not evidence of a particular outlet’s likely performance.
What do outlet changes and franchisee conversations reveal?
Read the Item 20 tables
Item 20 includes three-year tables for system outlet changes, including openings, closures, transfers, and terminations. Look for patterns rather than treating one change as a verdict. Investigate closures or other departures in or near the market you are considering, and ask the franchisor to explain changes you cannot reconcile.
Speak with current and former operators
Use the current and former franchisee contact information in Item 20. Compare several accounts instead of treating one unusually positive or negative experience as representative. Ask current operators:
- What they actually spent to open and how long opening took.
- How training, opening support, and ongoing assistance worked in practice.
- What recurring fees and required supplier purchases cost, and how their quality compares with alternatives.
- How much owner labor the restaurant requires and how progress toward break-even compared with their expectations.
- What they would investigate before buying again.
Ask former operators why they left and whether transfer, termination, or other contract provisions affected their exit. Treat these conversations as a way to test the disclosures and identify follow-up questions, not as a substitute for reviewing the documents.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What happens if you renew, sell, or leave?
Item 17 summarizes key provisions on renewal, termination, transfer, and dispute resolution. Find out what conditions must be met to renew, whether fees or terms can change, which defaults can lead to termination, and whether a sale requires approval. Check whether disputes are handled in court, arbitration, or another process. Ask a lawyer to explain post-termination restrictions, including limits on competing activity, under the law applicable to the proposed location.
Item 22 attaches the proposed franchise and related agreements. Read the actual documents, including any lease, option, purchase agreement, addendum, or state rider included with the FDD. Compare their language with the FDD summaries: the signed contract governs the relationship.
What should you check in the financial statements and attachments?
Item 21 contains the franchisor’s financial statements. Have an accountant review the statements and notes and assess what they indicate about the franchisor’s ability to provide the support it promises. The statements do not establish that a particular restaurant will be profitable.
Check that every referenced exhibit is present and readable, especially the franchise agreement, addenda, state riders, financial statements, and any support for Item 19 representations. Item 23 is a receipt acknowledging documents received. Confirm it accurately lists the FDD and exhibits you received, and retain the dated receipt. Ask for written clarification before signing if material documents are missing or inconsistent.
How can you compare two restaurant franchise offers?
Compare the same evidence for each offer and, where possible, for the specific locations and formats under consideration. The FTC disclosure structure identifies relevant areas to compare; it does not rank brands or establish that one offer is better.
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Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Repair Windows errors before they cause bigger problemsFix Now →| Comparison area | What to compare |
|---|---|
| Opening costs and payments | Item 5 fee, Item 7 investment categories and assumptions, payment timing, recipients, and refund conditions. |
| Ongoing costs and purchasing | Royalties, marketing, technology and other recurring fees; required suppliers, purchase restrictions, and operator reports of actual costs. |
| Market rights and support | Territory scope and exceptions, training, opening assistance, ongoing support, and operating obligations in the contract. |
| Performance information | Whether Item 19 is provided, which outlets and period it covers, its assumptions and limits, and the available substantiation. |
| System movement and operator experience | Item 20 openings, closures, transfers, and terminations; current and former operators’ reports of opening costs, support, and reasons for leaving. |
| Contract and franchisor | Renewal, transfer, termination, and dispute provisions; Item 21 financial statements; and the experience identified in Items 1–4. |
Who should review the FDD before you commit?
Have an independent franchise lawyer review the FDD and agreements, including any state-specific issues, and an accountant assess the financial statements, investment assumptions, and any Item 19 claim. Confirm applicable state filing or disclosure requirements and location-specific restaurant permits with qualified professionals; those requirements depend on where and how the restaurant will operate. Do not sign or pay until material questions have written answers and you understand the obligations in the proposed contract.
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