# FDD Item cheat sheet

A Franchise Disclosure Document (FDD) has 23 standardized Items. When analyzing a franchise as an
investment, these are the ones that matter and what to pull from each. Source FDDs:
https://franchisefasttrack.io/fdd-database

| Item | What it is | What to extract |
|---|---|---|
| **1** | The franchisor and its parents/predecessors | How long in franchising, who owns it (PE-backed?) |
| **3** | Litigation | Pattern of **franchisee** lawsuits = a red flag |
| **4** | Bankruptcy | Any franchisor/affiliate bankruptcy |
| **5** | Initial franchise fee | One-time fee to join |
| **6** | Other fees | **Royalty %** and **ad/brand-fund %** of revenue, plus tech/other ongoing fees |
| **7** | Estimated initial investment | **Total all-in cost, low and high** (the real number to budget) |
| **8** | Restrictions on sourcing | Forced suppliers / rebates the franchisor keeps |
| **11** | Franchisor obligations | Training, support, marketing the franchisor actually provides |
| **12** | Territory | Is the territory **exclusive** or can they put a unit next to you? |
| **19** | Financial Performance Representation | **Unit revenue/earnings** — average, median, sample size, and which units. **No Item 19 = no disclosed unit economics (flag it).** |
| **20** | Outlets and franchisee info | **Unit counts** at year start/end, openings, **closures, terminations, transfers** (3 yrs), and a franchisee contact list |
| **21** | Financial statements | The **franchisor's** audited financials — is the franchisor itself healthy? |
| **23** | Receipts | Confirms the disclosure date / FDD year |

## How to read Item 19 honestly
- Use the **median**, not just the average — averages are pulled up by top units.
- Check the **sample**: "system-wide" vs "top quartile" vs "company-owned only."
- Check **what % of units actually reach** the reported figure (often disclosed alongside).
- Costs are usually **not** fully disclosed — estimate margin conservatively.

## How to read Item 20 (system health)
- Net unit growth over 3 years, annualized.
- **Closures + terminations + non-renewals** ÷ starting units ÷ 3 = rough annual churn.
- A growing brand with low churn and a real Item 19 is the healthy combination.

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Maintained by [Franchise Fast Track](https://franchisefasttrack.io). Free FDD library:
https://franchisefasttrack.io/fdd-database