At The Franchise Fit Company, we guide clients through a trusted, thorough process to explore franchise opportunities with confidence. Our Founder, Casey Floyd, brings a wealth of experience from every angle of the franchising world—having served as a franchisor executive, helped launch a new franchise brand, and owned franchises herself. She also knows firsthand what it feels like to invest in a franchise that wasn’t the right fit—an experience that drives our mission today.
Our number one goal is to help you find a business that aligns with your goals, lifestyle, and definition of success. With our proven process and personalized approach, we’ll ensure you’re making an informed, empowered decision as you step into your next chapter.
We take the time to understand your personal and professional goals, build a customized business owner profile, and identify franchise opportunities that align with your unique vision. Best of all, our services are provided at no cost to you—we’re here to educate, connect, and support you every step of the way.
Ready to take control of your career and turn your dream of business ownership into reality?
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We take time to understand your goals and build a business profile around your unique vision.
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One of the most common questions that I get asked as a franchise coach? How can I afford a franchise? Nobody is expecting you to completely cover this investment out of pocket (although paying for your franchise cash is certainly a possibility). For those who need them, many franchise funding options are available. Today, we are going to talk about two of the most popular.
When prospective franchise owners evaluate funding options, two of the most common structures are SBA 7(a) loans and ROBS (Rollovers as Business Start-ups) using retirement funds. Each approach can work well depending on the individual’s financial situation, risk tolerance, and long-term goals.
Now, let’s take a closer look at these two options. This clear breakdown will compare structure, benefits, risks, and long-term implications so that you can feel confident in your path forward toward owning a franchise.
SBA (7a) Loan vs. ROBS (401k Rollover): What Franchise Buyers Should Know
If you are looking to buy a franchise, understanding the funding options behind franchise opportunities is a crucial part of the process. Here at The Franchise Fit Company, we take franchise education seriously. We want to help you build deep knowledge of your options so that you can move forward feeling empowered, confident, and ready to take on franchise ownership like a boss. Let’s start with the SBA (Small Business Administration) loan…
1. SBA 7(a) Loan
The 7(a) loan program is the Small Business Administration’s primary business loan program focused on providing financial assistance to small businesses – yes, you read that right! Franchises are small businesses, too! Here’s how it works…
Structure
The SBA 7(a) loan is the most common financing vehicle used in franchising.
How it works:
- First, the borrower applies through an SBA-approved lender (bank or non-bank lender).
- The lender issues the loan, and the U.S. Small Business Administration guarantees a portion of the loan (typically 50% to 75%).
- The borrower receives capital, which can be used for for:
- Franchise fees
- Buildout
- Equipment
- Working capital
- Franchise fees
- The business repays the loan monthly with interest.
Those are the basic steps to acquiring and repaying a Small Business Administration loan. HEre are some other fasts facts you need to know about the typical SBA franchise loan structure:
| Component | Typical Range |
| Loan size | Up to $5 million |
| Down payment | ~10–30% |
| Term | Up to 10 years (business) |
| Interest | Prime + margin |
| Personal guarantee | Required |
Benefits of SBA Financing
Leverage your capital
Instead of using all personal funds, the SBA allows business owners to invest a portion (usually ~20%) and borrow the rest. This is advantageous for those who are not particularly liquid or who have less readily available cash to put down.
Preserves retirement accounts
Your 401(k) remains invested and growing for retirement, as opposed to being used to open your business through an option like ROBS.
Builds business credit history
With an SBA loan, you will be able to build a strong credit history for your business.
Predictable monthly payments
You will have an understanding of the loan term and the payment you owe each month before you sign anything. This helps you avoid unexpected costs.
Lower interest vs. many alternative lending options
As the SBA 7(a) loan is a government-backed program, you will be able to access competitive interest rates that you may not see from competitors.
Considerations & Risk
Personal Guarantee
The borrower is personally responsible for repayment.
Collateral Requirements
Homes, retirement accounts, or other assets may be pledged depending on lender policies.
Debt Service Pressure
Monthly loan payments begin quickly and can impact early cash flow.
Approval Process
SBA loans require documentation and underwriting and can take 30–90 days to complete.
Long-Term Implications
Taking out an SBA 7(a) loan has long-term implications both positive and negative for future franchise owners.
- Builds long-term credit and borrowing capability
- Interest expense reduces taxable income
- Requires stable cash flow to service debt
- Personal liability exists if the business fails
2. ROBS (Rollovers as Business Start-ups)
Now that you have a better understanding of the SBA loan option, let’s turn our attention to ROBS. This acronym stands for Rollovers as Business Start-ups, and it is a little-known franchise funding option that might be just right for your needs.
Remember, even though the ROBS program uses your retirement funds, that is not a red flag! Some people are scared off by the prospect of dipping into their retirement savings, and that is totally understandable. This option may not be for everyone. Other people, however, buying a franchise as an excellent way to build their retirement funds even further and actually use that money to generate wealth that will support their family for years. Here’s a little more about the ROBS program…
Structure
A ROBS allows someone to use retirement funds (typically from a 401k or IRA) to fund a business without paying early withdrawal penalties or taxes.
The process:
- A new C-Corporation is created
- A new 401(k) plan is established within that corporation
- Your existing retirement funds are rolled into the new 401(k)
- The 401(k) purchases stock in the new company
- The company now has cash to fund the business
Essentially, your retirement funds become equity in your company. Sounds pretty good, doesn’t it?
Benefits of a ROBS
No debt payments
There are no monthly loan payments, which improves early cash flow.
No interest costs
With the ROBS program, you are not borrowing money – you are using your own! Therefore, you do not have to pay for interest, saving you lots of money in the long term.
No personal guarantee
Again, not borrowing money comes in handy here. There is no need to leverage your assets or cough up collateral in order to use your own money to buy a franchise.
Faster funding vs. SBA
Compared with SBA 7(a) loans, it typically takes less time to set up a rollover through the ROBS program.
Can be combined with SBA financing
Many franchise owners use a ROBS as the down payment for an SBA loan. Sound interesting to you? We can talk more about the financial side of franchise ownership in our free, one-on-one consultation.
Considerations & Risks
Retirement Risk
With ROBS, your retirement savings are tied directly to the performance of the franchise business. While some people appreciate taking control of their retirement earnings, others find this too risky. Your own individual risk tolerance is up to you.
Must Operate as a C-Corporation
ROBS structures require a corporate structure, which may have tax implications.
Compliance Requirements
The retirement plan must follow IRS and ERISA regulations.
Administrative Costs
It does cost money to set up a rollover through the ROBS program. Here are some ballpark figures you can expect to see…
| Fee Type | Typical Range |
| Setup | $4,000 – $6,000 |
| Monthly administration | $100 – $200 |
Long-Term Implications
There are both positives and negatives to using a ROBS rollover to fund your franchise. Here are some key points to consider when choosing the right franchise funding option for you:
- Your retirement investment is directly tied to business success
- If the business fails, the retirement funds invested may be lost
- Potential upside if the business grows in value
- Requires ongoing retirement plan administration
SBA vs ROBS: Side-by-Side Comparison
Find some more information about an SBA loan vs. a ROBS program rollover right here…
| Factor | SBA Loan | ROBS |
| Debt | Yes | No |
| Monthly payments | Yes | No |
| Interest | Yes | No |
| Personal guarantee | Yes | No |
| Risk to retirement funds | No | Yes |
| Business structure required | Any | C-Corporation |
| Approval process | Bank underwriting | Setup through ROBS provider |
| Tax advantages | Interest deductible | None specific |
| Cash flow pressure | Higher | Lower |
Hybrid Strategy (Common in Franchising)
Many franchise owners use both an SBA loan and a ROBS rollover. Here is an example of what that might look like…
- The franchisee uses $100K from ROBS (retirement rollover) to get started
- They also take out a $400K SBA loan
So, why would you choose this hybrid approach? Benefits of the hybrid approach include…
- Reduces SBA down payment requirements
- Limits personal debt exposure
- Preserves some retirement funds
I like to say that this hybrid structure offers you the best of both worlds – mitigating risks from either side!
Strategic Considerations for Prospective Business Owners
When deciding between SBA or ROBS, here are some key questions to ask yourself:
1. Risk tolerance
Are you comfortable tying your retirement savings to the franchise business?
2. Cash flow expectations
Will the franchise business generate revenue quickly enough to support loan payments?
3. Long-term financial planning
How important is preserving your retirement investments?
4. Exit strategy
How will the business sale or retirement transition impact your financial future?
Final Thoughts on Franchise Funding Options
Both SBA loans and ROBS structures are widely used in franchising, but they lend themselves to different financial strategies:
- SBA loans leverage capital but create debt obligations.
- ROBS eliminates debt but increases personal investment risk.
The best option often depends on financial profile, risk tolerance, and long-term wealth planning. We will talk through all of your options related to owning a franchise during our series of coaching meetings.
Schedule a free meeting right here. I can’t wait to chat with you and discuss franchise opportunities, building your business, and starting a new chapter in your career. Working with me is always 100% free, 100% of the time. Talk to you soon!
Have you ever wondered why franchise owners have to pay royalty fees? If so, you are not alone. Royalty fees are one of the first numbers that will probably catch your eye when you start looking into owning a franchise – and sometimes, they might seem unfair and frustrating.
Understanding franchise royalties is an important step of the process when opening a franchise and in the years that come after your grand opening. Today, we are going to break down the ins and outs of royalty fees so that you feel confident in what you’re paying for – and why.
Why Franchise Owners Pay Royalty Fees and What Other Ongoing Fees to Expect
If you’re exploring franchise ownership, one of the first numbers that jumps off the page in the FDD is this: Royalties.
You are going to see that royalties eat up 5%… 6%… even 8% of gross revenue.
And the natural reaction is: “Why am I paying someone a percentage of my revenue forever?”
That is a fair question when it comes to owning a franchise.
Let’s break it down clearly, covering what royalties are, why they exist, and what other recurring fees you should understand before signing a franchise agreement.
What Are Royalties?
A royalty is an ongoing fee that a franchise owner pays to the franchisor. You will typically see royalty fees structured in one of the following ways:
- A percentage of gross revenue (most common)
- A flat monthly fee
- A tiered structure (much less common).
Most systems fall in the 4% to 8% range of gross revenue, though some go higher depending on industry and brand strength.
Fit Tip: Remember, royalty fees are usually based on top-line revenue, not profit. This is an important distinction to keep in mind when you are opening a franchise and budgeting to compensate yourself and your employees.
Why Do Franchise Owners Pay Royalty Fees?
Royalties are not just a “brand tax.” They fund the infrastructure that supports the entire franchise system.
We have talked a lot on the blog about the difference between starting a business from scratch, entrepreneurship through acquisition (ETA), and franchise ownership. Franchise royalties pay for a lot of those differences. Here’s what they typically cover…
1. Branding and Intellectual Property
You are licensing a lot from the franchise, including:
- The brand name
- The trademarks
- The operating system
- The playbook
That brand equity did not appear overnight. Royalties support ongoing brand development.
2. Ongoing Training and Support
When you are opening a franchise, you want to invest in a strong system. Strong systems provide:
- Field support
- Coaching
- Operational guidance
- Technology upgrades
- System refinements
Royalties fund the teams that make that level of support possible.
3. Research and Development
Markets change. Consumer behavior shifts. Technology evolves. Royalties help the franchisor ensure that they stay with the times, allowing them to…
- Improve processes
- Enhance marketing systems
- Develop new products/services
- Stay competitive
A healthy system reinvests in innovation, and that is part of what franchise royalties fund.
4. System-Wide Stability
A franchise system only works if the brand remains strong across locations. Franchise royalties allow the franchisor to:
- Enforce standards
- Maintain compliance
- Protect the integrity of the network
Without recurring revenue, a franchisor cannot sustain long-term infrastructure. You benefit when all of the brands in your system are doing well, and royalties help maintain that system-wide stability and a reputation for excellence.
But Let’s Be Honest…
Royalties reduce your margin. You are not keeping 100% of your revenue like an independent operator would.
The question becomes: Is the system support worth the percentage?
That’s a question of business analysis – not just an emotional reaction to a fee.
Now, as an independent operator, you would need to invest in infrastructure to run your business. The offset is finding vendors, marketing strategies, brand, operations – and of course, the process of trial and error. For many, the cost of royalties takes away that headache.
Franchise royalties pay for you to be part of a system where the trial and error is done for you. Vendors are sourced. Marketing strategies are nailed down. You are buying into a solid, reliable, reputable brand – and that benefits your bottom line.
Other Recurring Franchise Fees You May See
Royalties are just one part of the equation. Do not forget about some other common ongoing franchise fees disclosed in the FDD:
1. Brand Fund / Marketing Fund Contribution
This typically amounts to between 1% and 4% of gross revenue. It goes into a national or system-wide marketing fund used for:
- Digital advertising
- Brand campaigns
- Creative development
- SEO
- Website management
- PR initiatives
Important distinction: This is separate from what you spend on local marketing in your territory. It is used for the brand as a whole, and the franchisor decides specifically what to spend it on.
2. Local Advertising Requirements
Some systems require additional franchise fee spend for local advertising, such as…
- A minimum monthly ad spend
- A percentage allocated locally
- Participation in co-op marketing groups
Even if it is not required by your franchise brand, local marketing is essential, both when you are first opening a franchise and in the years that follow.
3. Technology Fees
Franchise fees for technology may include:
- CRM systems
- POS software
- Reporting platforms
- Scheduling systems
- Website hosting
You will often see technology fees structures as either a flat monthly fee or a per-location tech fee. It all depends on your franchise system.
4. Renewal Fees
When your initial term ends (often after 10 years), you may pay:
- A renewal fee
- A percentage of the then-current franchise fee
Paying these fees essentially re-ups your license to use the franchise’s branding and continue operating under their banner. The renewal fee is usually significantly less than the franchise fee you will pay when you are first opening a franchise.
5. Call Center
If your franchise system offers a call center for inbound leads, scheduling, etc., you might have to pay for that service. In some cases, it may be optional – in others, it may be required. Again, it all depends on the brand. Either way, this is usually assessed as a flat monthly fee.
6. Transfer Fees
If you sell your franchise, the franchisor typically charges a transfer fee, generally assessed between 25% and 50% of the current franchise fee at the time of transfer.
Fit Tip: Getting overwhelmed with all of these fees? Remember, they will be outlined clearly in your Franchise Disclosure Document (FDD).
7. Audit or Late Fees
There may be penalties or interest assessed from the franchisor if one of the following scenarios occur:
- Reports are late
- Royalties are unpaid
- An audit finds underreporting
How to Evaluate Franchise Royalties the Right Way
Here’s what I tell my clients: Do not evaluate royalties in isolation.
Instead, ask thoughtful questions:
- What does this percentage buy me?
- Does the support match the fee?
- Are franchisees satisfied with the value received?
- Is the brand investing back into growth?
- Does the financial model still work after royalties?
A 6% royalty in a high-margin, well-supported system may be far more attractive than a 3% royalty in a weak one. Lower is not automatically better – you get what you pay for.
A Common Misconception About Franchise Royalties
Many clients will say something like this before opening a franchise: “Once I’m up and running, what does the franchisor really do?”
If the answer is “not much,” that’s a red flag.
Healthy franchise systems are actively engaged, providing services like:
- Coaching performance
- Refining strategy
- Managing brand consistency
- Improving technology
- Protecting the network
- Advising your on growth/scaling strategy for long-term success
Royalties should feel like fuel for growth – not dead weight that’s eating away at your margins with no benefit to you as an owner.
Final FranFit Thoughts on Royalty Fees
Royalties are the price of leveraging:
- An established brand
- A proven system
- Ongoing support
- A network of peers
You are not paying to “rent a logo.” You are buying into an ecosystem.
The real question is not: “Why do I have to pay royalties?”
It is: “Does this system generate more value than it costs me?”
That’s where smart diligence comes in. If you’re evaluating a specific brand and want help modeling what royalties actually mean for your take-home income, that’s a conversation worth having before you sign.
Start Your Journey to Owning a Franchise Today
Are you ready to explore the ins and outs of opening a franchise? I’m ready to help! At The Franchise Fit Company, we are not selling anything. We are simply helping you navigate the process of opening a franchise and reducing the headaches you experience along the way. We help with everything from initially brand matching to FDD guidance to the validation process – and everything in between. The best franchise is the one that FITS you.
Schedule a free meeting right here. I can’t wait to chat with you and discuss franchise opportunities, building your business, and starting a new chapter in your career. Working with me is always 100% free, 100% of the time. Talk to you soon!
When you are looking at franchise opportunities to find the perfect franchise business for you, you will eventually be confronted with the FDD. This acronym stands for Franchise Disclosure Document, and it is an important piece of the franchise validation process.
Today, we are going to look more closely at one component of the FDD: lawyer review. Let’s dive deeper into this frequently asked question about franchise opportunities.
Pros, Cons, Timing – and What Most Buyers Get Wrong
If you are seriously exploring franchise ownership, at some point you will hear this advice: “You should have a lawyer review the FDD.”
That may be true. But it is also incomplete.
As someone who walks clients through the franchise business evaluation process every day, I’ve seen both sides. On the one hand, there are buyers who skip legal review entirely. And on the other hand, there are buyers who hire the wrong attorney and create unnecessary friction.
To avoid creating problems as you explore franchise opportunities and look for the best franchise to own, let’s break this down clearly and take a look at the pros and cons of working with a franchise lawyer to review the FDD.
Fit Tip: Still have questions about the FDD in general? We have an article that can help! If you did not stop off and read about “Understanding the Franchise Disclosure Document (FDD),” I recommend starting there before continuing.
The Pros of Using a Franchise Lawyer
Before we talk about the pros of using a franchise lawyer when you are looking at how to buy a franchise, let me make one thing clear: We are not talking about just any lawyer. You need to use a franchise lawyer (if you are using a lawyer at all).
I often say this to clients: “You would not go to a franchise lawyer to advise on your divorce settlement, so let’s not go to the friend of the family real estate lawyer to review your FRANCHISE disclosure document.” Right? Here is why…
1. Franchise Lawyers Understand Franchise-Specific Law
Franchising is governed by both federal regulation and state registration requirements. A franchise attorney understands:
- State-specific addendums
- Registration states vs. non-registration states (learn more in this article about FDD re-registration and “going dark”)
- Relationship laws (like termination protections in certain states)
A general business lawyer may have a deep understanding of these franchise-specific concepts. Remember, practicing law is a highly specialized business. When you are looking for the best franchise to own, you want an expert to help advise you!
2. Franchise Lawyers Know What Is Standard vs. Unusual
Franchise agreements are heavily one-sided. That is normal. After all, franchisors want to convince you that theirs is the best franchise to own.
Fit Tip: That’s where I come in – I am not trying to sell you on one franchise versus another franchise business. We simply work together to determine the franchise opportunities that best fit your needs and are most aligned with your goals as a business owner.
Anyway, back to franchise lawyer information. An experienced franchise attorney can tell you:
- What is standard across systems
- What is unusually restrictive
- What creates long-term risk exposure
That perspective matters when you are investing in a franchise business.
3. Franchise Lawyers Clarify Long-Term Risk
With their extensive industry knowledge, a franchise lawyer can help you understand:
- Personal guarantees
- Transfer restrictions
- Liquidated damages
- Default triggers
- Non-compete scope
You are not just signing up for year one with your franchise business. You are signing on for a relationship lasting five to ten years… or maybe even longer.
The Cons (or Limitations) of Using a Franchise Lawyer
Now, let’s balance our conversation about franchise business lawyers and discuss the drawbacks of a franchise lawyer reviewing your FDD.
1. Franchise Lawyers Cost Money
Legal review can range from $2,500 to $5,000 or even more, depending on the complexity of what you are looking for.
For some buyers, that feels like a heavy ask before they have even decided. Plus, investing in a franchise costs money, so you may want to save your funds for the Franchise Fee.
2. Franchise Lawyers Will Not Tell You if This Is a Good Business
A lawyer reviews legal risk. They do not:
- Evaluate market viability
- Validate financial model assumptions
- Assess operational fit
- Tell you whether the brand aligns with your lifestyle goals
Legal strength does not equal business viability. This is why it is important to explore a franchise business from every angle.
Fit Tip: Working with The Franchise Fit Company gives you an opportunity to investigate a variety of different franchise opportunities to find the best franchise to own for YOU. We support you through an unbiased review of your options so that you can feel confident moving forward.
3. Some Franchise Attorneys Create Fear
This point goes back to the importance of using a franchise-specific lawyer. If an attorney does not specialize in franchising, they may:
- Flag standard clauses as “dangerous”
- Overreact to common franchise language
- Suggest unrealistic negotiations
All of these issues can lead to tension with the franchisor – unnecessarily.
When Should You Have a Franchise Lawyer Review an FDD?
So, is there a situation when you should have a franchise lawyer review the FDD from a franchise business? And if so, when? Here is my professional recommendation:
You can consider having a franchise lawyer review the FDD after…
- You have validated with multiple franchisees
- You understand the financial model
- You feel confident in the brand
- You are preparing to sign
And make sure you do so before:
- You attend a Meet the Team or Discovery Day
Legal review should be the final diligence layer, not the first step on your list once you receive the Franchise Disclosure Document.
Why You Should NOT Use a Family or Divorce Lawyer
This is important. Remember my comment above?? Let me shed more light onto this topic to drive the point home.
A divorce attorney or family lawyer may be excellent at their specialty… but franchising is its own niche. I will say it again: You would never hire a personal injury lawyer to litigate your divorce. You would never hire a divorce lawyer to settle a workman’s compensation dispute. Law is a specialized practice, so hiring a specialized lawyer DOES matter.
Here’s why it makes such a big difference:
- Franchise agreements are system-wide contracts used across hundreds of owners
- Many clauses are intentionally non-negotiable
- Certain “harsh” language is industry standard
- Franchise relationship law is specialized
Using the wrong attorney can create a number of issues, including…
- Alarming you unnecessarily
- Damaging rapport with the franchisor
- Creating redlines that will never be accepted
- Slowing down your process
You want someone who understands franchise norms, not someone who treats the FDD like a real estate contract. Choosing a specialized lawyer makes a big difference when evaluating franchise opportunities.
Will a Franchisor Negotiate a Redlined FDD?
The short answer? Rarely.
Longer answer? The FDD itself is a registered disclosure document. It is not negotiated. The Franchise Agreement inside it may have limited flexibility.
Here’s the reality. Most established franchisors…
- Do not negotiate core economics
- Do not modify operational standards
- Do not change system-wide rules
There are a few things that may be more possible to negotiate. In rare cases, you might see:
- Minor territory clarifications
- Payment structure adjustments
- Addendums for multi-unit development
- State-required changes
But walking in with heavy redlines as a single-unit buyer? That is usually not productive. AND, you are setting yourself up for disappointment when they say NO to your suggested changes.
Franchising works because of uniformity. If every franchisee negotiated custom terms, the system would break.
So… Should You Use a Franchise Lawyer?
In most serious franchise purchases, yes. But the type of lawyer is important. Make sure that you…
- Use one who specializes in franchising.
- Use them at the right stage.
- Understand their role.
- Don’t expect them to negotiate the system into something unrecognizable.
Would I ever tell someone NO to an attorney review? Yes, I would. There is a time and place for using a franchise attorney, and I will help you navigate choosing that moment.
When you feel comfortable with the agreement but you are only wanting a review for negotiation purposes, that is wasting your time and money.
Legal review is about understanding risk – not rewriting the model.
Final Franchise Fit Company Thoughts
Franchise ownership is not just about reading a contract. It is about so much more…
- Lifestyle alignment
- Financial readiness
- Operational capability
- Brand trust
- Mutual validation
A franchise lawyer protects you legally. But your broader diligence – validation calls, financial modeling, discovery day conversations – protects you strategically.
Know the difference.
Take the Next Step to Find Your Franchise Business
Schedule a free meeting right here. I can’t wait to chat with you and discuss franchise opportunities, building your business, and starting a new chapter in your career. Working with me is always 100% free, 100% of the time. Talk to you soon!
Not all silence in franchising is bad news.
One of the most common — and legitimate — reasons a franchisor may pause communication or franchise sales is FDD re-registration. Unfortunately, this period is often misunderstood by prospective franchisees and those exploring brands and interpreted as trouble, instability, or worse. Why are they “going dark”? We had to stop the process – is something wrong?
Let’s clear that up so that you can move ahead confidently with owning a franchise.
FIT Tip: Learn more about the Franchise Disclosure Document (FDD) in our recent blog.
Not All Silence Is a Red Flag
Every franchisor is required to update and re-register its Franchise Disclosure Document (FDD) annually, typically following its fiscal year-end.
During this compliance window, it is normal for things to slow down or temporarily stop on the development side of the business.
This is what’s actually happening behind the scenes…
What’s Actually Going On During FDD Re-Registration
Most franchisors must pause franchise sales while their updated FDD is being finalized and approved. During this time:
- Franchise sales pause
- Discovery Days may be delayed
- Development teams go quiet
- No franchise agreements can legally be signed
This isn’t failure or avoidance — it’s responsible compliance.
A franchisor that continues selling during this period is taking on regulatory and legal risk — for themselves and for the prospective franchisee. They officially do not have an active FDD – the old one is out, and the new one is being approved.
Selling franchises with an outdated or unapproved FDD can result in:
- Regulatory penalties
- Buyer rescission rights (the ability to unwind the deal)
- Legal exposure for both parties
That’s why a franchisor who pauses sales during renewal is actually doing the right thing, even if it feels inconvenient or uncomfortable from the outside when you are looking at franchise opportunities.
What a Franchisor Updates During FDD Re-Registration
What is happening when a franchisor updates its FDD? Here is a look behind the scenes at this important piece in owning a franchise…
Financial Statements (Item 21)
This is the backbone of the update.
- Audited balance sheet
- Income statement
- Cash flow statement
Why it matters:
This tells you whether the franchisor is financially healthy, stable, or under strain. It’s one of the biggest reasons sales must pause until renewal is complete. And, all prospective franchisees want updated numbers for their evaluation of the system they are inquiring about. Wouldn’t you want to know what happened last year? Updating the FDD is an important piece of giving you the full picture before owning a franchise.
Franchise System Growth & Turnover (Item 20)
When a franchise business reviews Item 20 in their FDD, they are looking for updated counts of:
- New franchise openings
- Closures
- Transfers / resales
- Terminations
Why it matters:
This shows real system momentum (or contraction). Trends here often matter more than headline brand size. It is important to see sustained growth in the brand, with new owners joining and being successful. Is it ok to see a few close, sure – not all reasons for closing are bad. Ideally, you want to see growth, increased sales numbers, and a healthy system.
Litigation and Bankruptcy Updates (Items 3 & 4)
An update to the FDD must include any new lawsuits, settlements, or bankruptcies involving:
- The franchisor
- Executives
- Parent or affiliate companies
Why it matters:
Prospective franchisees deserve visibility into legal risk before signing. Do all have a clean slate? No, but it is good to understand what is going on with your support system.
Fees and Investment Ranges (Items 5–7)
These sections of an FDD may be updated to reflect:
- Fee increases or restructuring
- Changes in required vendors or costs
- Revised working capital assumptions
Why it matters:
Inflation, labor costs, real estate, and insurance changes often show up here. As someone interested in owning a franchise, it is imperative that you understand the fees associated with launching and growing a new business. Your financial preparation is a huge factor in success at launch.
Support, Training, and Operations (Item 11)
In this section of the FDD, updates may include:
- Changes to training format or duration
- Adjustments to field support
- New technology platforms or systems
Why it matters:
What you’re promised going forward is not necessarily what existed two years ago. Part of being in a franchise system is the frameworks, support, and coaching you receive. When you read the FDDs for franchise opportunities, you want to ensure you are receiving the infrastructure discussed in the evaluation process.
Earnings Disclosures (Item 19) – If Provided
If the franchisor offers a Financial Performance Representation (Item 19):
- Data is refreshed
- Outdated performance groups may be removed
- New averages or medians may appear
Why it matters:
This is one of the most scrutinized updates – and one of the most regulated. Franchisors typically show only operating franchise units in the system that have performed for a full 12 months. You will want to see an updated snapshot of the system – while only averages, these numbers should improve year over year as the franchise grows.
Remember: Financial disclosures in an Item 19 are not required, but they are often included in the FDD.
Agreement and Addendum Changes (Item 22)
Updates to Item 22 include any changes to:
- Franchise agreement language
- Addendums
- State-specific riders
Why it matters:
Even “small” edits can materially affect exit rights, transfer rules, or obligations. Do not gloss over this important section of the FDD when you are considering franchise opportunities.
How Differentiate Between Normal Compliance and Real Trouble
The key difference between normal compliance and changes that you should actually worry about is not silence — it is communication and continuity.
What Normal FDD Re-Registration Looks Like
- A clear explanation when asked
- A defined (even if flexible) timeline
- Ongoing support for existing franchisees
- Corporate operations continuing as usual
Potential Red Flags to Watch For
- Vague or evasive answers
- Support disappearing for current owners
- No communication or timeline at all
- Leadership exits layered on top of the silence
Silence paired with transparency is normal. Silence paired with instability is not.
The “Going Dark” Timeline
What is “normal” when it comes to a franchisor going dark? The short answer: anywhere from a few weeks to several months, depending on where the franchisor sells and how much is updated. Yes, I know, it is not a clear-cut answer.
Here is why: States are broken into Non-Registration States, Filing States, and Registration States. Let’s take a look at the differences.
Registration States (13): Approximately 4-12 Weeks
A franchise registration state requires:
- The FDD to be filed, reviewed, and approved by a state regulator
- Updates every year (and sometimes mid-year if changes are material)
- Formal approval before franchise sales can resume
So, what are the registration states?
- California*
- Hawaii
- Illinois
- Indiana
- Maryland
- Minnesota
- New York*
- North Dakota
- Rhode Island
- South Dakota
- Virginia
- Washington
- Wisconsin
*California and New York are known as the slowest and most detailed FDD reviews. Many times, these are the last states for a franchise to register in. I have seen these take MONTHS! So, a franchise sales developer is not pressuring you to sign before going dark – they may just not have a clue when it will be available again.
Filing States/Notice Requirements (Not Full Registration): Approximately 2-4 Weeks
These states don’t “approve” the FDD, but they still require notice filings or exemptions that are less restrictive but still regulated. These states include…
- Michigan
- Texas
- Florida
- Kentucky
- Utah
- Nebraska
- And others
The Bottom Line
The FDD isn’t designed to convince you to buy a franchise — it’s designed to protect you and provide you with valuable information. You want the MOST UPDATED version of the FDD possible.
The goal in franchising isn’t to find a business with no risk. It’s to find one where the risks:
- Match your goals
- Fit your lifestyle
- Align with your tolerance for stress
- Support your long-term exit plan
Understanding the FDD is how informed buyers make confident decisions.
Okay, that was A LOT of information. Want to discuss in more detail? Grab some time on my calendar, and we can debrief. My goal is not to “sell” you on owning a franchise – it is to educate you so you can make the best decision for your future. Your success in franchising is my success!
*I am not a lawyer and will not provide legal advice or representation.
Buying a franchise business isn’t about picking a logo or a brand name (yes, I sound like a broken record). It is about understanding risk, responsibility, and fit. The most important document in that process is the Franchise Disclosure Document (FDD).
Yet many buyers:
- Don’t know what the FDD actually contains
- Focus on the wrong sections
- Get overwhelmed!
Let’s break this down clearly and practically so that you can move ahead confidently when you are considering a franchise for sale.
What Is the Franchise Disclosure Document (FDD)?
The FDD is a legally required disclosure document regulated by the Federal Trade Commission. Its purpose is not to sell you a franchise business — it is to disclose risks, obligations, and realities before you sign anything. When speaking with a franchisor, they must disclose this document, and there is a mandatory review period before you can sign any franchise agreement.
This is called the 14-day rule: Once the franchisor delivers the FDD, typically through DocuSign, the clock starts. You CANNOT sign the franchise agreement, sign any binding agreements, or pay a deposit or initial fee until that time has passed.
There is also the 7-day rule: once you receive the final franchise agreement (written for YOU) after the FDD was delivered, you must have at least 7 calendar days to review the final version before signing.
Who enforces this, you ask? The Federal Trade Commission.
Every franchisor must present the FDD in the same format, consisting of 23 required sections, called “Items.” Whether you are looking at pet franchises, fitness franchises, or any other franchise business out there, you will be given an FDD in the same format.
The FDD Sections That Matter Most (and Why)
While all 23 items matter, not all deserve equal attention. Here’s how to read the FDD like an informed buyer of a franchise for sale — not a hopeful one.
1. Who You’re Partnering With (Items 1–4)
These sections explain:
- The franchisor’s history and structure
- Leadership experience
- Litigation history
- Bankruptcy disclosures
What to look for:
Patterns, not perfection. One lawsuit isn’t alarming — repeated disputes, leadership turnover, or unresolved litigation can be when considering a franchise for sale.
2. Your True Financial Commitment (Items 5–7)
This is where many buyers underestimate risk. Here is what to look for in the FDD of a franchise for sale…
- Item 5: Initial franchise fees
- Item 6: Ongoing royalties, marketing fees, technology fees
- Item 7: Estimated total investment range
What to look for:
- Is working capital realistic for your lifestyle and household needs?
- What assumptions drive the low vs. high investment range?
- Are vendors required — and who controls pricing?
Item 7 is not a guarantee. It’s a starting estimate, not your final cost. Remember, the Item 7 is not going to include your first-year salary (if you want to pay yourself while starting), manager salary (if you want to start this with leadership in place), etc. These numbers will get your business open, serving customers with some operational capital in the bank.
3. Control, Territory, and Competition (Items 8–12)
These sections define how much autonomy you truly have when you purchase a franchise business.
- Territory protection (or lack of it)
- Supplier requirements and rebates
- Franchisor support and training
- Whether the franchisor can compete with you directly
What to look for:
- Vague territory language
- E-commerce or national accounts selling into your area
- Heavy control without corresponding support
4. Lifestyle Expectations and Exit Strategy (Items 15–17)
These items are often skipped — and later regretted. You will find important information about any franchise business in Items 15, 16, and 17. These are important items to review for fitness franchises, pet franchises, and virtually every industry out there.
- Owner participation requirements
- Renewal terms
- Transfer and resale restrictions
- Non-compete clauses
What to look for:
If you can’t clearly explain how you exit, you’re not ready to enter.
5. Performance and System Health (Items 19 and 20)
These two sections should always be reviewed together when you are considering purchasing a franchise business.
- Item 19: Financial Performance Representations (earnings claims — optional)
- Item 20: Number of franchise openings, closures, and transfers
What to look for:
- Are top performers the only ones represented?
- Are closures increasing year over year?
- Do validation calls support what’s shown on paper?
Context matters more than averages. All of these numbers need to be validated during the next phase of exploration: Validation. You can also read more about the Item 19 in one of my other recent blog posts!
What Buyers Should Focus on Most
If you’re short on time when buying a franchise, here is what you should prioritize in the FDD:
- Item 7: Capital and cash runway
- Item 11: Ongoing support after launch
- Item 12: Territory and competition
- Item 17: Exit and transfer rights
- Item 19: Earnings logic
- Item 20: Franchisee turnover and system health
Check out more Franchise Disclosure Document Blogs:
Should I Get an Attorney to Review the FDD?
What does “Going Dark” mean?
This is A LOT of information to tackle on your own. When you are ready for a full tour guide on this process (for free), let’s schedule some time to chat: Calendar
FAQs About Owning a Franchise Business
What is a franchise owner?
A franchise owner purchases a franchise business from a larger company, called the franchisor. The franchise owner (also called the franchisee) is able to use the branding, marketing, and larger network of the franchise business in order to gain a reputation and customers. However, franchise ownership is highly attractive as it allows you to work for yourself, on your own schedule and your own terms. You will be owning a small business and making an impact on your local community.
How to become a franchise owner?
Becoming a franchise owner – whether you are looking at pet franchises, fitness franchises, or anything else on the market – requires research and dedication. It is imperative to find the right FIT for your needs. Finding a franchise for sale that aligns with your needs and goals as a business owner is the best way to set yourself up for success (and profits!).
Working with The Franchise Fit Company is the fastest and most effective way to make your dreams of becoming a business owner come true. We will help you find the best fit for YOU, setting you up for long-term success and career fulfillment, as well as strong compensation.
How much do franchise owners make?
Franchise owners with different brands make different amounts – but there is no one “best” franchise to own or most profitable franchise to own. Instead, success in franchising comes down to finding the best fit for YOU. If you choose a brand that does not play to your strengths or offer the flexibility and freedom you want, you will not have as much success. You need to select a franchise brand that makes you excited to get out of bed in the morning.
At The Franchise Fit Company, our job is to help you do just that. Having earnings goals is all well and good, and we will take those into consideration when exploring different franchise brands. But the most important predictor of financial success as a franchise owner is finding your FIT.
Schedule a free meeting right here. I can’t wait to chat with you and discuss franchise opportunities, building your business, and starting a new chapter in your career. Working with me is always 100% free, 100% of the time. Talk to you soon!
Before you buy a franchise, you will go through a process of exploring different franchise opportunities. First, we will work together to narrow down which franchise opportunities are best for your needs and goals as a business owner. Then, we will embark on a detailed exploration of a select few franchise opportunities. During this more concentrated stage of the process, you are going to have what is called Validation Calls. So, what are Validation Calls and why are they important?
Validation Calls give you the opportunity to talk to existing franchise owners within a brand’s system before you buy a franchise. You will speak with a variety of different owners to learn more about the experience of owning a given franchise.
What should these Validation Calls cover? Here are some key Validation Calls you should have when it is almost time to buy a franchise.
The “Day-in-the-Life” Conversation
Your first priority is understanding the reality of the role – not the brochure version. You’re not just going to buy a franchise. You’re going to buy a job description for yourself for the next three to ten years. This is the time to understand what is required of the owner to be successful. In particular, does this brand truly FIT your expectations of day-to-day involvement?
Sample Questions to Ask:
- “What does a typical day look like for you from start to finish?”
- “How much of your time is spent on sales, operations, people management, and admin?”
- “What are 2–3 tasks you personally can’t delegate right now?”
- “If someone shadowed you for a week, what would surprise them the most?”
What you’re listening for:
- Does their day align with how you actually want to spend your time?
- Are they mostly in the field? In the office? Networking? Hiring and coaching?
- Are they doing work that plays to your strengths or your weaknesses?
If their day sounds like a life you would dread, that is a sign that the model might be fine, but the fit is wrong.
The Ramp-Up & Learning Curve Conversation
The second conversation is about how hard it really is to get from zero to functioning after you buy a franchise.
Sample Questions to Ask:
- “How did your first 6–12 months go compared to what you expected?”
- “What were the hardest parts of getting started—licenses, hiring, learning the systems, something else?”
- “How long did it take before you felt confident and not constantly in ‘figure it out’ mode?”
- “If you were starting again, what would you do differently in your first 90 days?”
What you’re listening for:
- Are owners consistently saying, “It took longer than I expected”?
- Were there surprises the franchisor should have prepared them for?
- Does the learning curve match your tolerance for discomfort and chaos during that first year?
You want honest stories, not just timelines. That’s where the truth lives.
The Financial Reality (Without Being Awkward) Conversation
Money questions feel delicate, but you can absolutely have them without asking for someone’s P&L. How you ask questions is important, too. Remember, everyone comes from VERY different backgrounds and has different levels of comfort with money questions. Keep the questions simple.
Sample Questions to Ask:
- “Did your actual numbers roughly match what you saw in the FDD or were you above/below?”
- “What is your average job ticket price?”
- “What are your big monthly expense items to run the business”
- “Knowing what you know now, would you have come in with more capital?”
- “Have you been able to pay yourself? If not yet, when do you think you will?
What you’re listening for:
- Are owners consistently under- or over-performing what’s represented?
- Is there a theme around underestimating working capital?
- Are they proud and confident talking about the financial trajectory, or hesitant and vague?
You’re not looking for exact dollar amounts for these franchise opportunities. You’re looking for patterns and ranges – and whether this opportunity fits your reality and risk tolerance. Remember, you are in control of making financial decisions for YOUR business. Get the back of the napkin numbers: job revenue, expenses… Boom, you have some margin, and then you know your debt.
The Franchise Support and Relationship Conversation
A strong brand isn’t just a logo. It is also the support system behind you. When you are looking for the best franchise to buy, it is not only about money. It is also about the support you will receive and the relationship with the company behind the franchise opportunities.
Sample Questions to Ask:
- “How would you describe your relationship with the franchisor?”
- “When you run into an issue, how responsive is the support team?”
- “What kind of help do you realistically get with marketing, operations, and training?”
- “Have you ever felt like the franchisor wasn’t listening? How did they respond?”
- “How much do you engage with other owners?” “Are they supportive?”
What you’re listening for:
- Is there a culture of partnership or policing?
- Do owners feel heard or brushed off?
- Are they excited about where the brand is going, or worried?
If multiple owners use words like ignored, slow, frustrating, pay attention. Support doesn’t magically get better after you sign.
The Customers and Lead Generation Conversation
No leads = no revenue, no matter how great the brand looks on paper. How is this brand going to support you after you buy a franchise in gaining customers for your business?
Sample Questions to Ask:
- “Where do most of your customers really come from: corporate marketing, your own networking, referrals, something else?”
- “How effective has the franchisor’s marketing been in your market?”
- “What marketing activities do YOU do that move the needle the most?”
- “Have there been any big shifts in demand or competition since you started?”
What you’re listening for:
- Is the brand marketing engine actually helping—or is it mostly on the owner?
- Are there specific tactics that consistently work across owners?
- Is demand stable, growing, or shrinking in different markets?
This is where you separate hype from what actually drives business. Please note, YOU are responsible for your local marketing. All owners will complain about lead flow – what are they doing about it from all angles is important to understand.
The Challenges, Regrets, and “Real Talk” Conversation
This might be the most valuable conversation you’ll have if you ask the right questions… and then stop talking. Listening to owners talk about the realities of franchise opportunities is absolutely priceless.
Sample Questions to Ask:
- “What’s the hardest part of this business that no one prepared you for?”
- “Have you ever seriously considered selling or walking away? What triggered that feeling?”
- “What do you like least about being part of this franchise system?”
- “If someone you loved was considering this brand, what warning would you give them?”
What you’re listening for:
- Common pain points: hiring, margins, burnout, competition, support gaps.
- Signs of misalignment between what was sold and what was experienced.
- Whether the challenges are things you can live with… or not.
No franchise is perfect. You’re not looking for a brand with no problems. You’re looking at whether the problems are acceptable trade-offs for the opportunity.
The “Would You Do It Again?” Conversation
This is the ultimate gut-check question. Before you buy a franchise, this one is the absolute MUST-ASK.
Sample Questions to Ask:
- “If you could go back in time, would you buy this franchise again?”
- “Would you choose the same brand, or a different industry/model?”
- “Would you pick the same territory or market?”
- “What kind of person do you think truly thrives in this system?”
What you’re listening for:
- Their first reaction—a quick “Yes, 100%” sounds very different from a long pause.
- Subtle hesitations like, “Yes, but…” or “Probably, if…” — those “buts” matter.
- Their description of who thrives—does that sound like you?
This is where you often get the most honest, distilled perspective: regrets, gratitude, pride, and frustration all in one.
How Many Owners Should You Talk To?
This is a question so many clients ask when looking for the best franchise to buy. As a rule of thumb:
- Average: 3–5 owners
- Ideally: A mix of…
- High performers
- Average performers
- Newer owners (in first 1–2 years)
- More mature owners (3+ years in)
You want to see the whole spectrum, not just the “highlight reel” you’re introduced to. Remember to have a purpose for each call. If you are trying to talk to everyone to build a case NOT to do it – you are taking the wrong approach. Get your concerns alleviated or proven.
Bringing It All Together
Talking to existing franchise owners is not about getting one perfect answer that tells you “yes” or “no.”
It’s about:
- Spotting patterns across multiple conversations
- Checking those patterns against who you are and what you want
- Confirming whether this franchise is the right fit, not just a recognizable logo
The Franchise Fit Company is here to help you navigate, explore, and ask the right questions. Want to learn more about franchise opportunities? Book time on my Calendar here!
Schedule a free meeting right here. I can’t wait to chat with you and discuss franchise opportunities, building your business, and starting a new chapter in your career. Working with me is always 100% free, 100% of the time. Talk to you soon!
are you the right fit?
Corporate professionals
laid-off leaders
mid-career professionals
Corporate professionals who are tired of job instability or chasing the next title.
Laid-off leaders looking to take control of their future instead of re-entering the job market.
Mid-career professionals seeking more flexibility, lifestyle freedom, or impact
early retirees
career changers
side hustlers
Early retirees or those looking for a second act that’s both meaningful and financially rewarding.
Career changers ready to invest in themselves and build long-term equity.
Side hustlers who may not be ready to leave corporate but want a transition and additional income, diversify assets.
Military Veterans
Veterans looking to use their experience leading teams, following proven process and operational systems for a post-Military career.
When my husband and I started looking for a franchise, we wanted something that aligned with our values—something we’d be proud to build. Working with franchise coach Casey Floyd made all the difference. From the start, she made us feel at ease and truly listened to what mattered to us. Her thoughtful guidance led us to Archadeck Outdoor Living, a well-established brand with a strong track record and an excellent fit for our background. We’re grateful for Casey’s support and wouldn’t hesitate to recommend her.
carrie f.
Alejandro M.
Working with Casey was critical to help me understand the franchise business model and landscape. From our very first conversation, Casey’s guidance, industry knowledge, and honest advice helped me with the clarity I needed to move forward, and to gain some confidence that this journey was one I was capable of pursuing. She genuinely cares about her clients’ success and ensures you feel supported at every step. I wouldn’t hesitate to recommend Casey to anyone considering franchise ownership — she’s an outstanding coach and partner in the process.”
2/4
norah p.
Casey was instrumental in guiding us through the process of business ownership through franchising. She takes the time to get to know you, what drives you, your morals and then she gets to work! She is super efficient and has a huge network of businesses in her back pocket to find the perfect fit! If you are thinking about being your own boss, Casey Floyd is the person to contact!
3/4
sam p.
Casey was incredible in helping me search for the right franchise to own and operate. She's thoughtful, intelligent, and exceptionally well-connected in the franchising world. More than that, she’s an empathetic listener who genuinely wants what’s best for you. Throughout the entire process, Casey was by my side — always available to answer questions and never once making me feel rushed. Even now, after having signed a franchise agreement, she continues to check in on my progress and offer support. She's truly a gem, and I’m so grateful for everything she’s done!
