How we collect and check franchise cost data

Where the numbers come from

For a sale covered by the federal disclosure rule, a franchisor must give buyers a Franchise Disclosure Document (FDD) at least 14 calendar days before a binding agreement with, or payment to, the franchisor or an affiliate in connection with the proposed sale. The rule has exemptions (16 CFR 436.2). The FDD has 23 sections called Items (16 CFR 436.5) and annual and material-change updating requirements (16 CFR 436.7). We obtain FDDs from state regulator filings. Capital and net-worth requirements may instead come from a brand's official franchise website, with that source identified. Each franchise page links to its source filing and lists the PDF page numbers for the sections we cite.

What we take from each FDD

• Item 5, initial fees: the franchise fee and any other fees paid before opening.
• Item 6, other fees: royalties, brand or advertising fund contributions, technology fees, and fees that only apply in certain situations (transfers, renewals, audits).
• Item 7, estimated initial investment: each startup cost line and the total range.
• Item 19, financial performance representations: any revenue, profit or expense figures the franchisor chooses to disclose. Many don’t.
• Item 20, outlets: how many franchised units opened, closed, were terminated, not renewed, bought back or transferred in each of the last three years.

The downloadable franchise cost dataset exports selected fields with source links and review status. Its rows are a research index; the brand pages and cited FDDs contain the fee conditions, samples and unresolved differences needed to interpret them.

10-year startup and recurring-fee estimate

When the disclosed revenue and fee terms support the calculation, our 10-year model is:

Item 7 startup investment + 10 × (yearly sales × recurring percentage fees + recurring fixed fees)

The model uses recurring sales-based percentages and flat weekly, 28-day, monthly, quarterly or annual fees from Item 6. A fee charged every 28 days occurs 13 times in a 364-day cycle. For yearly sales it uses the selected average or median franchised-unit revenue figure from Item 19. Sales ranges, profit percentages, per-student royalties and transaction charges are not interchangeable with these inputs. If fees depend on sales subsets, minimums, caps, credits or other missing inputs, the page shows the disclosed terms without an all-sales fee total. Brands with those terms cannot automatically prefill the fee calculators. Without a suitable revenue metric, no annual dollar estimate is made. The true cost calculator accepts a reader's own assumptions.

This is a limited startup-and-fee estimate, not the full cost of ownership or a profit forecast. It assumes flat sales and does not add a continuing operating budget for rent, payroll, products, financing or taxes. Some of those expenses may already appear in the Item 7 startup range for its stated initial period; they are not added a second time. The FDD may discuss operating costs elsewhere without supplying enough inputs for this model.

Franchise exit rate

For each year in Item 20, we calculate:

(terminations + non-renewals + units reacquired by the franchisor + units that ceased operations) ÷ franchised units at the start of the year

This measures reported franchise exits, not permanent physical-store shutdowns or failed owners. A reacquired outlet may still operate as a company store. Temporary closures, reopens, format changes and multiple events can also affect the source totals. Transfers in Table 2 are not included. We retain the FDD's printed values and explain source discrepancies rather than inventing a reconciliation. We withhold a year's calculated rate when that row does not balance, and withhold the multi-year average if any reported year does not balance. For records without a completed FDD source check, calculated rates are also withheld. For verified records with reconciling rows, brand pages show the arithmetic mean of the available yearly rates, not a pooled multi-year rate.

The cross-brand Item 20 study includes only published records with a completed FDD source check, reconciling outlet movements and comparable outlet accounting. It lists excluded brands with the reason each was left out.

Earnings figures

An earnings page is eligible only when Item 19 includes actual dollar revenue or profit figures; expense-only, percentage-only or forecast-only figures do not qualify. We report eligible figures as the franchisor states them, including the period and which units they cover. Franchisors choose what to include, and averages may leave out new or closed units. Where suitable inputs exist, a fee-only illustration is separate from the disclosed metric; the remainder is not owner income or profit. We do not relabel revenue as profit.

How each page is checked

1. We obtain a regulator-filed FDD and record its issue date and source. A later amendment may require another review.
2. We pull Items 5, 6, 7, 19 and 20 into a structured record, noting the PDF page of each figure.
3. A separate source review checks transcription, definitions and footnotes. A printed contradiction remains a flagged issue, not a guessed correction.
4. Automatic checks test Item 7 line totals within a one-percent tolerance, Item 20 movement arithmetic (start + opened − exits = end), required source fields and content rules. Draft warnings and source-review findings still require attention; passing a validator is not certification of every statement.
5. When a source reviewer completes the PDF check, the brand page records the real verification date. A limited group was published by owner direction before that review finished; those pages have no check date and display a provisional warning. Source pages remain visible for readers to inspect.

Updates

FDDs have annual and material-change updating requirements. When we find a later filing, we flag the affected page until we can compare the document with the figures shown. A previous check does not clear a later source-review hold. The issue date identifies the document, the first-publication date identifies when our page went live, and the checked date records a completed comparison with the PDF. We change the checked date only after that review.

Check a brand record against its filing

1. Open the brand page's Sources section. It links to the regulator filing and, when available, the FDD PDF. The cited page numbers use the PDF viewer's page count, which can differ from the printed page labels.
2. Match the FDD's brand, issue date, amendments and business format to the record before comparing a figure. Item 7 can report different investment ranges for different formats.
3. For an Item 19 sales figure, check the FDD's reporting period, sample and exclusions. For an Item 20 franchise exit rate, compare the Status of Franchised Outlets table with the formula above. A disclosed sales figure is not owner profit, and an exit is not necessarily a store shutdown.
4. Read any provisional warning or source-review hold on the page. If a number, label or qualification differs from the PDF, send the brand URL, FDD link and cited page through our corrections form.

How we use AI

FDDs are long, and the same five Items sit in different places in every one. We use software, including AI tools, to find those Items, to pull figures into the structured record, to run the second-pass check against the PDF, and to draft the explanatory text on each page.

AI is not a source for franchise figures. Source review and owner approval remain necessary because software can misread a table or omit a qualification. Analysis uses placeholders for data values instead of independently typed amounts; years and Item references can appear in the text. Placeholders keep displayed values aligned with the record, but cannot prove that a field or interpretation is correct. Automated style and similarity checks help identify prohibited wording and repeated analysis; they do not replace editorial review. Our editorial policy states who may complete a source check and how unresolved records are labeled.

Limitations

• Item 7 figures are the franchisor’s estimates. Your costs depend on location, size and build-out.
• Item 19 figures are selected by the franchisor and may not represent a typical owner.
• An FDD describes the previous fiscal year, so figures can be several months old.
• We cover brands whose FDDs are publicly available, which is not every franchise.

Corrections

If you find a figure that doesn’t match the FDD, tell us. We check it against the filing and correct the page if we were wrong.