1851

A brand’s <a href="https://1851franchise.com/how-to-read-a-franchise-disclosure-document-2714764#home">Franchise Disclosure Document</a>, or FDD, provides hundreds of pages of details regarding nearly every facet of the operation, and yet, it won’t tell you everything there is to know about a brand. There are other, essential factors not included in the document that every prospective franchisee should weigh.<a href="https://frannet.com/franchise-consultant/jack-armstrong/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=what-you-wont-find-in-a-franchise-disclosure-document-2714811" target="_blank" rel="nofollow">Jack Armstrong</a>, the New Jersey market president of <a href="https://frannet.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=what-you-wont-find-in-a-franchise-disclosure-document-2714811" target="_blank" rel="nofollow">FranNet</a>, advises franchisee candidates to ask the company to go above and beyond the legal requirements of an FDD. After all, it’s your money, Armstong says, and if a franchisor has nothing to hide, it should be more than willing to assuage any concerns with a little extra info.&nbsp;<h4>Ask For More Data</h4>For example, while the FDD requires the franchisor to estimate the level of working capital franchisee candidates need for the first three months, but feel free to ask for more than that.&nbsp;“Working capital is basically the revenue coming in versus the expenses,” said Armstrong. “When you open a new business, you’re probably losing money for the first three to six months, sometimes up to a year. The FDD gives the first three months worth as an estimate, but if losses continue past three months, you’ll need more working capital.”For a franchisee who puts their entire life savings into entering a franchise, the prospect of needing an additional injection of cash in just three or six months could make the entire enterprise untenable.&nbsp;For that reason, Armstrong recommends figuring out not just the first three months of working capital, but how much working capital the business needs until it reaches the break-even point, which could be a year away.&nbsp;Additionally, dig into <a href="https://1851franchise.com/the-franchise-bible-item-19-2703090">Item 19</a> of the FDD.&nbsp;<h4>How To Read Item 19</h4>“I think you need a better disclosure and itemized fees,” said Armstrong. “Tech fees, marketing fees, anything that’s going to come at you is going to be disclosed in detail in item 19, but make sure you get an itemized list.”Finally, beware of broad averages and median figures. A franchise may say their average franchisee brings in $500,000 annually, but upon closer inspection franchisee candidates may find that only one region is making $1,000,000 a year while the rest of the franchisees are scraping by on $200,000.&nbsp;Armstrong advises candidates to look at a brand’s top earners and make sure they’re not corporate stores.&nbsp;“Some FDDS are putting earnings claims without royalties because they’re showing corporate-owned units, but you’d be paying that royalties as a franchisee, so look out for that,” he said.&nbsp;<h4>Ask The Franchisees</h4>A good franchise should make other franchisees available during the signing process. Talk to as many other franchisees as possible. Prospective franchisees can directly ask them what the FDD didn’t prepare them for and find out how they feel the advertised numbers match with the real ones. Franchisee candidates should look to talk to existing franchisees in their region or in comparable markets, if possible.Importantly, franchisee candidates should never feel like they’re asking too many questions. Buying a franchise represents a huge life decision and should be treated as such. By asking questions, and even kicking the tires a bit on a nearby franchise, candidates show the franchisor that they’re diligent and mean business.

What You WON’T Find in a Franchise Disclosure Document

1851 Franchise

A franchise’s FDD is a critical resource for prospective franchisees, but it won’t tell the whole story. Here’s what else you need to know before you sign.

what-you-wont-find-in-a-franchise-disclosure-document

BooXkeeping

From Ice Cream to Income Streams: How Greg Cox Found His Sweet Spot with BooXkeeping

from-ice-cream-to-income-streams-how-greg-cox-found-his-sweet-spot-with-booxkeeping

Children's Lighthouse

Children’s Lighthouse Named Among America’s Best in Customer Service by Newsweek

childrens-lighthouse-named-among-americas-best-in-customer-service-by-newsweek

KLA Schools

How KLA Schools Is Redefining Early Childhood Education Through a Hands-On, Academically-Rich Approach

how-kla-schools-is-redefining-early-childhood-education-through-a-hands-on-academically-rich-approach

Why Tennessee Is a Strategic Growth Market for Children’s Lighthouse

why-tennessee-is-a-strategic-growth-market-for-childrens-lighthouse

Comfort Keepers

Comfort Keepers Eyes Salt Lake City for Expansion: Meeting the Rising Demand for In-Home Senior Care in Utah

comfort-keepers-eyes-salt-lake-city-for-expansion-meeting-the-rising-demand-for-in-home-senior-care-in-utah

Buying a Franchise Masterclass

 Franchise Opportunities

Get Support Buying a Franchise

How to Buy a Franchise White Paper

How to Buy a Franchise

How to Sell Franchises

How to Grow a Franchise

Find a Franchise Supplier

1851 Franchise Opportunities

Franchisor News

Franchisor Power Rankings

FranCamp Mastermind Summit

Franchise Development Website Builder

Franchise Resources

What ALEC-Laffer's Report Means for Franchising

Website Awards

Power Rankings

About 1851

Advertise on 1851

Contact 1851 Editorial

Terms of Use

1851 Login

GROWTH CLUB LOGIN

facebook

instagram

twitter

linkedin

youtube

McDonald’s Launches New Extra Value Meals as Consumer Demand for Value Continues to Climb

mcdonalds-launches-extra-value-meals

Power Eats: Smoothie King Rolls Out Food Nationwide To Fuel Franchise Growth

smoothie-king-food-menu-power-eats

Keurig Dr Pepper Splits in $18 Billion JDE Peet’s Deal, Creating Global Coffee Giant

keurig-dr-pepper-splits-in-18-billion-jde-peets-deal-creating-global-coffee-giant

McDonald’s Rolls Out Major Value Push To Win Back Customers Amid Inflation

mcdonalds-rolls-out-major-value-push-to-win-back-customers-amid-inflation

Photo of Paris Baguette pastries and beverages 

Paris Baguette Celebrates 250th Café Opening in Frederick, Maryland, Accelerating Expansion and Reviving the Neighborhood Bakery Café

paris-baguette-250th-north-america-cafe

Hooters Leans Into Franchising With Closure of 30 Company-Owned Stores - Agg - 1851 Franchise

Hooters Leans Into Franchising With Closure of 30 Company-Owned Stores

hooters-franchise-model-company-owned-closures

Wendy's CEO Kirk Tanner Steps Down - Breaking News - 1851 Franchise

Wendy’s CEO Kirk Tanner Steps Down Amid Challenges, Leaving Franchisees Facing Uncertainty

wendys-ceo-transition-kirk-tanner-franchisee-uncertainty

Planet Fitness Franchisees Donate $100K to Support Texas Flood Relief - 1851 Franchise

Planet Fitness Franchisees Donate $100K To Support Texas Flood Relief

planet-fitness-texas-flood-relief

graphic image of a franchisee spotligh aman kaur of voodoo brewing

How This Trio of Friends Is Brewing Up Community With Voodoo Brewing Co. in Prosper, Texas

voodoo-brewing-franchisee-aman-kaur-prosper-texas

Franchise Deep Dive graphic with i9 Sports logo

i9 Sports Franchise Costs, Fees, Profit and Data for 2025

i9-sports-franchise-cost-fees-profit

Hely and Hiral Patel Bring Their Longtime Dream to Life With The Brass Tap

brass-tap-franchise-pasadena-maryland-hely-hiral-patel

Franchisee spotlight graphic with photo of Ricki Oberoi and Layne's Chicken Fingers logo

Multi-Unit Wendy’s Operator Signs 12-Unit Deal With Layne’s Chicken Fingers

ricki-oberoi-laynes-chicken-fingers-growth

How Vishal Juneja Turned a Family Tradition Into a Paris Baguette Franchise

How Vishal Juneja Turned a Family Tradition Into a Paris Baguette Franchise Built on Heart and Community

paris-baguette-franchise-rockaway-new-jersey-vishal-junjea

What You WON’T Find in a Franchise Disclosure Document

MORE STORIES LIKE THIS