Franchise Disclosure Document: The 23 Items Explained

A Franchise Disclosure Document (FDD) is the standardized, 23-item disclosure a franchisor must give you at least 14 calendar days before you sign anything or pay any money. It is required by the FTC Franchise Rule (16 CFR Part 436), and every legitimate franchise offering in the United States uses the same 23 numbered Items in the same order — which is exactly what makes it possible to compare one franchise against another. This guide explains what each Item covers and which ones decide the deal.

What the FDD Is — and the 14-Day Rule

The FDD exists so you can evaluate a franchise before you are committed to it. The Franchise Rule requires the franchisor to deliver the complete FDD at least 14 calendar days before you sign a binding agreement or make any payment. That window is yours to read the document, compare it to other systems, and have it reviewed by counsel. If a franchisor pressures you to sign early, waive the period, or pay a deposit before the 14 days run, that is itself a red flag. For a quick orientation, see understanding the FDD and what an FDD is and what it should include.

The 23 Items at a Glance

Every FDD contains these 23 Items, always in this order:

The Items most likely to make or break a decision are 5, 6, and 7 (what it costs), 19 (whether the franchisor will say what you can earn), 20 (how many franchisees have left), and 3 and 21 (the franchisor’s legal and financial health). The rest provide essential context, but those are where the real risk hides.

The Franchisor’s Health: Items 1–4

These four Items tell you who you are dealing with. Item 1 describes the franchisor and its corporate family. Item 2 lists the experience of its key executives — look for real operating experience in this concept, not just a roster of titles. Item 3 discloses litigation, and patterns matter more than any single case: repeated suits by franchisees against the franchisor are a warning. Item 4 discloses bankruptcies. Read these together to judge whether the system is stable enough to support you for the length of the agreement.

The Money: Items 5, 6, and 7

This is the financial core. Item 5 covers the initial fees you pay before opening (the franchise fee and any other pre-opening payments). Item 6 is a required table of every other fee — royalties, advertising fund contributions, technology, transfer, renewal, audit, and late fees — with amounts and due dates, so you can compare systems line by line. Item 7 is the estimated initial investment: a table of every startup cost with low and high estimates, usually including a “working capital” line that often covers only the first few months. Build your own budget from Item 7’s high estimate plus realistic operating losses to break-even. For the full breakdown, see the complete guide to franchise fees.

The Operating Rules: Items 8–18

These Items define what running the business will actually be like. Item 8 discloses required suppliers and whether the franchisor profits from your purchases. Item 9 is a cross-reference table of your obligations. Item 10 describes any financing. Item 11 is one of the longest and most important — it details the franchisor’s pre-opening and ongoing assistance, the advertising fund, required technology, and training. Item 12 defines your territory and whether it is exclusive. Items 13 and 14 cover the trademarks and proprietary information you are licensed to use. Item 15 states whether you must personally operate the business. Item 16 lists restrictions on what you may sell. Item 17 is critical: it sets out renewal, termination, transfer, non-compete, and dispute-resolution terms — read it alongside the franchise agreement itself. Item 18 discloses any public figures used to promote the system.

The Proof: Items 19–23

These Items let you test the opportunity against reality. Item 19 is the financial performance representation — and it is optional. If a franchisor includes one, it must have a reasonable basis and you may rely on it; if Item 19 is blank, the franchisor is making no earnings claim, and any verbal promise of profits outside the FDD is improper. Item 20 gives outlet counts and the contact information for current and former franchisees — calling them, especially those who left, is the single most valuable diligence step you can take. Item 21 is the franchisor’s audited financial statements. Item 22 attaches every contract you will sign. Item 23 is the receipt that starts the 14-day clock. For a structured way to work through it all, see the FDD review checklist.

Frequently Asked Questions

How many items are in an FDD?

Exactly 23, in a standardized order set by the FTC Franchise Rule. Any document labeled an “FDD” that does not follow the 23-item format is not a compliant disclosure document.

How long do I have to review the FDD?

At least 14 calendar days before you sign a binding agreement or pay any money. The clock typically starts when you sign the Item 23 receipt acknowledging that you received the document.

Is the franchisor required to tell me how much I’ll earn?

No. Item 19 financial performance representations are optional. If the franchisor makes one, it must have a reasonable basis; if Item 19 is silent, no earnings claim is being made — and you should be skeptical of any profit promise made outside the document.

Do I need a lawyer to review my FDD?

It is not legally required, but the FDD and its attached agreement are long, technical, and binding for years. A focused review identifies the fees, restrictions, and exit terms that matter to your specific deal. See do I need my FDD reviewed.

The FDD is the most complete picture you will ever get of a franchise before you buy it — and the 14-day window exists so you can actually use it. Reidel Law Firm reviews FDDs for prospective franchisees on a flat fee, with a plain-English summary of the fees, obligations, and red flags in your specific deal — get your FDD reviewed before you sign.