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Evaluate a franchise

Understand a franchise’s fees and obligations, check the brand, and compare it with starting the same business on your own, before you sign anything.

Compare the numbersResearch a franchise

A franchise brand is not evidence that a particular location will be profitable. What you’re buying is a set of obligations and support. This page helps you understand them and model your own numbers. It doesn’t rank or recommend franchises, and GHL receives no franchise referral fees.

1. Read the disclosure document

Franchisors selling in the US generally must give you a Franchise Disclosure Document (FDD). Use this map of its items as a reading aid, not a substitute for professional review.

Show the reading guideWhat to check in each part, the 14-day rule, earnings claims and talking to franchisees
What to checkWhereWhat you’re looking for
CostsItems 5–7Initial fees, other recurring fees and the estimated initial investment.
RestrictionsItems 8 and 12Required suppliers and purchases, and what your territory does — and doesn’t — protect.
SupportItem 11Training, advertising, systems and other help the franchisor provides.
Performance claimsItem 19Any earnings claim: its basis, sample, limits and whether it applies to you.
System historyItem 20Openings, closures and transfers, and contacts for current and former franchisees.
Commitment and exitItems 17 and 22Renewal, termination, transfer, dispute terms and the actual agreements.

The federal timing rule

For covered, non-exempt franchise sales, the FTC Franchise Rule requires the franchisor to give you its current disclosure document at least 14 calendar days before you sign a binding agreement or pay the franchisor or an affiliate in connection with the sale (16 CFR 436.2). Exemptions and state rules can change what applies, so we don’t calculate a deadline for you — ask a qualified franchise attorney.

Earnings claims

A franchisor doesn’t have to make an earnings claim. An empty Item 19 isn’t, on its own, a warning sign — and a full one isn’t a promise. If a claim exists, look at what it’s based on, how many outlets it covers and whether they resemble yours. Gross sales are not profit.

Talk to franchisees

Ask current and former franchisees about actual opening costs, owner hours, required purchases, the support they really got, and — for those who left — why. Separate what they have seen from what a seller claims.

2. Check the brand

Get the facts the sales pitch leaves out

Free disclosure documents, how many owners left, how the brand’s SBA loans turned out, what the earnings claim really shows, and what to ask owners and brokers.

Show the brand checksFree disclosure documents, owners who left, SBA loan results, the earnings claim and questions to ask

Get the FDD free

Four states publish franchise disclosure documents online. Buying one elsewhere can cost $50–$220.

  • A brand appears only if it registered or filed in that state, and spelling must match. If you can’t find it in one state, try the others.
  • Ask the franchisor for its current FDD too: the federal rule requires it at least 14 calendar days before you sign or pay. Compare it with the filed version.

Read the earnings claim (Item 19)

Franchisors don’t have to make an earnings claim. If there is one, check what it really shows.

Does the FDD include an Item 19 earnings claim?

How many owners left? (Item 20)

Copy the franchised-outlet table (Table 3) and the transfers table (Table 2) from Item 20, oldest year first. There’s no standard “good” rate — compare brands with each other, and ask about every exit.

From Item 20Year 1Year 2Year 3
Outlets at start of year
Opened
Terminated
Not renewed
Reacquired by franchisor
Ceased operations
Transferred (sold)
Left the system———
Left or changed hands———
Outlets at end of year———

Item 20 also lists the names and contact details of current owners and of owners who left in the last year. Call them — the questions are below.

How the brand’s SBA loans turned out

Many franchise owners borrow with an SBA-backed 7(a) loan, and the SBA publishes how each loan ended. Search a brand to see how many of its owners’ loans from 2010–2019 were written off — a sign of owners who couldn’t keep up their payments.

What this does and doesn’t tell you
  • A loan is charged off when the lender can’t collect and the SBA writes off what’s left. That usually means the business closed or couldn’t pay — but owners who closed and repaid, or sold, don’t show up here.
  • Only SBA-backed 7(a) loans are counted. Many owners use other financing, so this is a sample of the brand’s owners, not all of them.
  • Loans approved October 2009 to September 2019, so each is at least seven years old. Loans still open count as not written off. A brand can change a lot over that time.
  • Brand names are as lenders recorded them; different spellings of one brand are grouped. Brands with fewer than 30 loans aren’t shown.
  • Use it as a question to ask, not a verdict: compare it with the turnover in Item 20, and ask the franchisor and former owners what happened.

Source: U.S. Small Business Administration, 7(a) loan data (opens in a new tab). Our grouping and calculations.

Questions for owners (validation calls)

The best evidence comes from people already running the business — and from those who left.

Call owners you choose from the Item 20 lists, not only the names the franchisor or a broker gives you.

Call at least as many former owners as current ones. Former owners are listed in Item 20.

Look for patterns across many calls, and compare what owners say with Items 7 and 19.

Current owners

  1. What did it really cost you to open, compared with the Item 7 estimate? What surprised you?
  2. How many hours a week do you work, now and in the first year?
  3. How long until you paid yourself? What do you take home now?
  4. How do your sales compare with the Item 19 figures? Are you above or below the middle?
  5. What must you buy from the franchisor or approved suppliers, and how do those prices compare with buying elsewhere?
  6. What support did you actually get, and what did you have to figure out yourself?
  7. Have fees or requirements changed since you signed?
  8. Knowing what you know now, would you buy again?

Former owners

  1. Why did you leave — sold, closed, terminated or didn’t renew?
  2. Did you get your investment back? If you sold, how long did it take and was the transfer fee or approval a problem?
  3. What would you check if you were buying today?
  4. Were you asked to sign anything that limits what you can say about the system?

Questions for a franchise broker

Brokers are usually paid by franchisors, not by you. That doesn’t make their advice wrong — but ask.

  1. 1Who pays you, and how much will you earn if I buy this franchise?Franchise brokers are typically paid by the franchisor, often 40–65% of the initial franchise fee.
  2. 2How many brands do you represent, and which of them pay you the most?A broker can only suggest brands that pay them.
  3. 3Are you registered as a franchise broker in my state?NASAA adopted a model broker-registration act in May 2026; check whether your state has enacted it.
  4. 4Will you give me the full list of current and former owners, or only selected names?Validation calls arranged by a seller can be staged.
  5. 5Have any franchisees you placed closed or left the system? May I speak with them?Their outcomes are the best evidence of the broker’s judgement.

3. Compare the numbers

Franchise or independent?

Start both routes from the same price, sales and cash. See what extra sales a franchise needs to cover its fees — not which route “wins”. Your numbers stay in this tab only.

Same for both routes

The same for both routes. A brand isn’t evidence of more sales.

Materials, supplies, payment fees. Franchise fees go on the right.

Shown as a disclosed alternative.

Going independent

Include your own marketing, software and outside support.

Equipment, setup, brand, training, deposits, launch.

Buying a franchise

Rent, insurance, staff, utilities — not franchise fees.

The franchise’s own fees and startup costs are listed one by one below, the way its disclosure document lists them.

The franchise’s fees and startup costs

Take each number from the franchise’s disclosure document (FDD). Enter 0 where a fee doesn’t apply. Typical figures are shown only where a sourced study exists.

One-time, before you open

One-time, before you open FDD Items 5 and 7

Item 5. No reliable typical figure exists — use the FDD.

Including travel to training.

Item 7 lists these. Use the high end of each range.

Every month, from each sale

Every month, from each sale FDD Item 6

Typical: median 6% of sales (2,414 recent FDDs). Sector figures below.

Typical: median 2% of sales.

Your own spend, if the FDD sets a minimum.

Flat amounts charged on each job or order.

Typical: $125–$200 a month median by sector (2019 study).

Co-op dues, required software, call center.

Annual conference, renewal of certifications.

Over the years

Over the years FDD Items 6 and 17

Item 17.

Shown in the totals, not charged in the projection.

Typical fees, with sources

Royalty and brand fund, median by sector

SectorFDDsRoyaltyBrand fund
Food and beverage8565%2%
Home services2686%2%
Fitness and wellness1637%2%
Cleaning and maintenance1517%2%
Child services and education1517%2%
Retail1285%2%
Senior care1236%1.8%
Business services998%2%
Health and beauty986%2%
All sectors2,4146%2%

Source: VetMyFranchise, Royalty Burden Index (2,414 FDDs filed 2022–2026). A company that sells franchise research; figures are medians of Item 6 rates (midpoint of ranges). Undated; retrieved October 2026.

Source: FRANdata, average royalty report (2,425 brands, 2012–2018). 87% of brands charged a fixed-percentage royalty, averaging 5.9%; about 1 in 5 had a minimum royalty.

Technology fees a month, by sector

SectorMedianCommon range
Quick-service restaurants$168$100–$333
Retail food$133$100–$306
Personal services$199$95–$350
Commercial and residential services$159$90–$332
Business services$156$83–$300
Automotive$125$75–$285
Retail products and services$150$83–$280

Source: FranConnect analysis for the International Franchise Association, “Tech Fees by the Numbers” (2,191 FDDs, July 2019). 62% of franchisors charged a technology fee, almost all as a flat monthly amount. 2019 data — fees have likely risen since. Published by an industry trade association.

Where we don’t show a typical figure

  • Initial franchise fee: Widely quoted ranges come from franchise-sales sites with no stated method. Look in Item 5 (and the first line of Item 7).
  • Total initial investment: Varies hugely by concept, and estimates are rising: in a 2025 survey of franchise executives, 94% said inflation had led them to raise their Item 7 figures. Lenders often plan on the high end of the range. Look in Item 7 — use the high end.
  • Renewal, transfer and remodel costs: No study reports typical amounts; terms differ brand by brand. Look in Items 6 and 17.

A typical figure is only a starting point. The brand you’re considering can be far from it, and the fees in its FDD are the ones you’ll pay.

Every fee to look for in the disclosure document (22)
FeeFDD itemWhat it is
Initial franchise fee5, 7One-time fee for the right to open; paid before opening and often non-refundable.
Other pre-opening fees5Initial training, site selection, opening help, grand-opening kits or first inventory bought from the franchisor.
Area development fee5Paid upfront for the right to open more than one location.
Royalty6Ongoing fee, usually a percentage of gross sales; sometimes a flat amount, tiered, or with a minimum.
Brand or marketing fund6Ongoing contribution to the system-wide advertising fund, usually a percentage of gross sales.
Local advertising requirement6A minimum you must spend on your own local marketing (not always paid to the franchisor).
Advertising cooperative6Dues to a regional group of franchisees that buys advertising together.
Grand-opening marketing7Required launch marketing spend.
Technology or software fee6Point-of-sale, booking, CRM or intranet systems; usually a flat monthly amount.
Additional training6Per-person or per-day charges for training new staff or managers after opening.
Required purchases and supplier markups8Items you must buy from the franchisor or approved suppliers, and any rebates the franchisor earns on them — often a hidden ongoing cost.
Remodel or refresh6, 8, 11Required reinvestment in the premises or equipment every few years.
Audit fee6Cost of an audit of your reported sales, usually charged only if you under-reported by more than a set amount.
Late fees and interest6Charges on overdue royalties and other payments.
Transfer fee6Charged when you sell or assign the franchise to someone else.
Renewal fee6, 17Charged to sign a new agreement at the end of the term — often with a remodel and the then-current terms.
Relocation fee6Charged to approve moving your location.
Fines for non-compliance6Penalties for failed inspections or missed standards.
Insurance through the franchisor6, 7Charged if the franchisor arranges insurance, or sets minimums you must buy.
Legal costs and indemnification6Reimbursing the franchisor’s costs in disputes or defaults.
Early-termination damages6, 17A lump sum owed if the agreement ends early.
Additional funds (working capital)7Cash to cover losses for an initial period — the rule requires at least three months.

Source: FTC Franchise Rule, 16 CFR 436.5. Defines what Items 5, 6, 7 and 17 of a Franchise Disclosure Document must disclose.

A fee the FDD doesn’t list — including one added later through the operations manual — is a red flag. Ask the franchisor in writing, and have a franchise attorney review the FDD and agreement before you sign or pay.

Fill in every required number to see the comparison (10 left). Enter 0 where a cost doesn’t apply.

Leaning toward going independent? Test that version in full — prices from your costs, the cash to get through the first months, a stress test and a decision report.

Test my business idea

4. Before you sign

Red flags, and what to bring your attorney

Show the red flags and the attorney checklist8 warning signs, and 7 things to bring to your franchise attorney

Stop and ask if…

  • You’re asked to sign or pay before you’ve had the FDD for 14 calendar days.
  • A fee you’re told about isn’t listed in Items 5, 6 or 7 — or a salesperson says a fee “never applies”.
  • Earnings figures are given verbally or in a brochure but not in Item 19.
  • Item 20 shows many closures, terminations or transfers relative to the number of outlets.
  • Owners you call can’t or won’t talk freely, or you’re only given hand-picked references.
  • Item 3 shows significant litigation with franchisees, or Item 4 shows a recent bankruptcy.
  • Required purchases (Item 8) carry rebates or markups to the franchisor that aren’t explained.
  • Pressure to decide quickly — “only one territory left”, “price goes up next week”.

In July 2024 FTC staff said a fee missing from the FDD is likely unlawful, and the FTC warned against clauses that stop franchisees reporting to regulators. Confirm the current status of that guidance with a franchise attorney.

Bring to your franchise attorney

A review typically costs a few thousand dollars; arriving prepared makes that time count.

  • The current FDD, with the receipt page you signed and its date.
  • The franchise agreement and any other agreements you’ll sign (lease, personal guarantee, supplier agreements).
  • Your notes from validation calls, including former owners.
  • Your own numbers: this site’s franchise-vs-independent comparison and one-page Business Idea Check summary.
  • Questions on Item 17: term, renewal conditions, termination, transfer, non-compete.
  • Questions on territory (Item 12), required purchases (Item 8) and any fees you don’t understand (Items 5–7).
  • How you’ll own it (entity, personal guarantee) and fund it (loan, savings) — useful for your accountant too.

GoProOffice is owned by GHL Financial Services, which offers business formation, tax planning and bookkeeping. The Business Idea Check is free and works the same whether or not you ever ask us for help.