Field guide entry
A field guide to restaurant franchises
How to read an FDD, what Item 19 means, why ongoing fees and square footage matter more than a slogan.
This is a field manual for reading restaurant franchise paper. It is not döner-only. The worked examples are the kebab and halal QSR packets a New York buyer actually gets: Döner Haus, German Doner Kebab, Shah’s Halal, The Halal Guys, and Doner Shack, which has no current US FDD.
A Franchise Disclosure Document is long, dull and legally required to tell you the truth about a short list of things. Most of what makes a deal good or bad is in four of its twenty-three items. The entries below work through those, in the order you should read them.
Before your first call
- Ask for the FDD in writing, and note the issue date and the state it was filed in.
- Find Item 5 and Item 6 first. Initial fee, then the ongoing percentage stack.
- Find Item 7 and read the range, not the low end.
- Turn to Item 19. If it is empty, that is an answer.
- Ask for the Item 20 franchisee list and call the ones who left.
Entries
- How to read an FDD The twenty-three items, and the four that decide the deal.
- Item 19 Financial performance representations, and what an empty Item 19 tells you.
- Ongoing fees Royalty plus brand fund is the number that compounds. Watch for uncapped.
- What it costs to open Item 7 totals, cheapest first. The high end is the planning number.
- Term and territory How long you are in, and what ground the filing actually protects.
- System size Item 20 outlet counts. A 323-unit chain and a six-unit shop, side by side.
- Training Item 11 hours, added up. Fifteen hours and five hundred are not the same offering.
- QSR vs fast casual The label changes the rent, the labor and the build.
- Footprint and labor questions Square feet and headcount at peak are the two costs nobody advertises.
- Red flags in franchise marketing Territory maps, pipeline counts, and other things that are not disclosures.
- Emerging food categories How to tell a real category gap from a deck slide.
The document itself
The deal is in four of twenty-three
Every FDD is the same twenty-three items in the same order, which is what makes it readable in an evening. Read these four first.
23 Numbered items
Fixed order, every brand, every year. Item 7 is the estimated initial investment; Item 20 is outlet counts and transfers.
4 That decide the deal
Item 5 the fee, Item 6 the ongoing stack, Item 7 the check to open, Item 19 whether they will show you a number.
19 The optional item
Item 19 is the only place a financial performance representation can live, and roughly a third to a half of franchisors include one.
21 Audited financials
Item 21 is the franchisor's own audited statements. Read them against Item 20's openings and closings.