Read these 10 FDD red flags before you sign anything
$1,290,000
What one published wellness-franchise fee stack — 10% royalty with monthly minimums, brand fund, mandated marketing — totals over ten years at a hypothetical $600,000/yr gross (2025 disclosure digests; arithmetic on your hypothetical, not a projection; the current FDD controls). Every dollar of it is disclosed in Item 6. If you read it.
The document in front of you decides the next ten years of your money. The salesperson will summarize it in an hour; these are the ten places where the fine print most often disagrees with the summary — and where a ten-minute read has saved buyers six figures.
None of these means a given franchise is a bad deal. Each is a place where the document, not the salesperson, should give you the answer — and where a good franchisor’s answer holds up in writing.
Item 6 — the ongoing fees, totaledAdd the royalty, brand/ad fund, technology fee, and any monthly minimum. Then multiply across ten years at your realistic revenue. The entry fee is the headline; this is the business model.
Item 19 — and whether it even existsIf there is a financial performance representation, ask for the median, not just the average, and which units are excluded. If there is no Item 19 at all, every revenue number you have heard is, by rule, not something you can rely on.
Item 20 — units opened vs. closedRead the tables for closures, transfers, and terminations, and the count of franchisees who left. A large gap between units sold and units open is a question worth asking out loud.
Item 3 — litigation historyLawsuits involving the franchisor and its principals live here. Read them; they tell you how the company behaves when a relationship goes wrong.
The real all-in (Item 7) vs. your capitalItem 7 is an estimate. Add working capital to break-even and a cushion, and compare against what you can actually lose without pain.
Who owns the brand and the customer list at exitIf you leave, do you keep the location goodwill and the customers you built? In most franchise structures, you do not.
Territory: exclusive, or merely ‘protected’?Read the exact grant. ‘Protected’ often has carve-outs for the franchisor’s own channels, including online.
Transfer and renewal termsWhat does it cost, and whose approval do you need, to sell or renew? These terms decide whether you built an asset or a job.
Required purchases and approved suppliersIf you must buy from the franchisor or its designees, that mark-up is an ongoing cost that never shows up in the royalty line.
The personal guarantee and post-term covenantsWhat do you sign personally, and what can you not do after you leave? Non-competes and post-term obligations outlast the agreement.
How to use this before your next call
Take the ten items into the franchisor and ask each as a written question. If the answers get worse the more precisely you ask, the document just told you something the pitch would not.
Where we stand — disclosedThis page is published by Atlas Metabolic, which offers a 0%-royalty license in this category (the operator owns their own brand; final terms are controlled by a written agreement, and Atlas makes no earnings or income-performance representations). Do the next ten minutes of diligence before any sales call gets your attention: step one, run your own number through the royalty calculator so you know what any percentage-of-gross offer really costs; step two, hold the Atlas structure to the same standard — documents, ten-year cost, ownership at exit. If our terms don’t survive your diligence, don’t buy from us either. Or start with the free FDD reviews.
Questions buyers ask
What is Item 6 in an FDD?
The fee table: royalty, brand/ad fund, technology fees, minimums, required spends. It is the single most financially consequential page of the document — total it across ten years at your realistic revenue before the entry fee impresses you.
Can I rely on revenue numbers a franchise salesperson quotes?
Only if they appear in Item 19 of the FDD. By rule, financial performance representations outside Item 19 are not representations you can rely on. If the number is not in the document, treat it as conversation.
What if the FDD has no Item 19 at all?
That is legal — and it means every revenue expectation you have heard exists outside the disclosure. The burden shifts to you: written questions, and validation calls to current franchisees from the Item 20 list.
How do I get a company's FDD?
Ask the franchisor directly (they must provide it at least 14 days before you sign or pay), or check state franchise registries such as Wisconsin's or Minnesota's public FDD databases, which publish filings free.