What we look for

Royalty plus brand fund, as a share of gross revenue. Where a royalty is stated as a range, the top of it — a rule about the load must warn about the load you might actually carry.

• Serious12% or more
• Worth asking about10% or more

A 6% royalty with a 2% brand fund is the common shape of a franchise agreement. Above 10% the fee load starts to constrain what the operator can pay themselves. The median across every filing we have read is 8%.

The top of the Item 7 range divided by the bottom.

• Context3.0x or wider

A wide band means the cost depends heavily on the site, so the midpoint is a poor planning figure. Context, not a fault.

The top of the investment range divided by the Item 19 revenue figure — what it costs to open, against what an outlet takes in a year.

• Serious2.0x or more
• Worth asking about1.0x or more

This is revenue, not profit, so 1.0x already means a whole year's takings do not repay the build.

Net change in franchised outlets over the reported year, as a share of the count at the start of it.

• Seriousdown 20% or more
• Worth asking aboutdown 5% or more

Terminations during the year, as a share of outlets open at the start of it.

• Serious25% or more
• Worth asking about10% or more

Actions disclosed in Item 3, per 100 outlets.

• Serious10.0 or more per 100 outlets
• Worth asking about3.0 or more per 100 outlets

A rate, not a count. Judged as raw counts, five suits across a thousand-outlet system fired the same warning as five across twenty — which is the comparison scaling is meant to prevent. Where no usable outlet count exists the rule falls back to 15 and 5 actions outright.

Whether Item 4 discloses a bankruptcy of the franchisor, an affiliate or a person managing it.

• Seriousdisclosed

Whether the audited financial statements carry a going-concern qualification.

• Seriousraised by the auditor

The franchisor's own accountants stating doubt that it can continue trading. There is no threshold to argue about here.

Whether the statements in Item 21 are audited.

• Seriousunaudited

Whether the filing makes an Item 19 representation at all.

• Contextno representation made

Item 19 is optional under the FTC Rule, and declining it is lawful and ordinary: counting this and the next rule together, 53.5% of the brands we have read state no per-outlet revenue. This says what we cannot tell you, not what the franchisor did wrong.

Whether the Item 19 representation includes revenue per outlet in dollars, rather than enrolment counts or one service line.

• Contextno per-outlet revenue stated

Whether the filing supports more than one reading of the average — for instance per territory where a territory holds several outlets, or mixing franchisee-owned and affiliate-owned locations.

• Worth asking aboutmore than one honest reading

A caution rather than context, and the distinction is deliberate: this is not a figure that is missing, it is a figure we DISPLAY that would overstate what you would earn if you read it as single-outlet revenue.

Whether you are granted any exclusive territory.

• Worth asking aboutnone granted

Another outlet of the same brand may open next to you. 39.7% of read brands grant none, so this is a genuine difference between agreements rather than a feature of franchising.

Whether the franchisor reserves channels inside your territory — online, wholesale, national accounts, its own outlets.

• Standardany reserved

On 63.2% of read brands. Worth knowing, not a finding.

How long you are barred from the trade after the franchise ends.

• Seriousmore than 3 years
• Worth asking aboutmore than 2 years
• Standard2 years or fewer

Two years is the industry term: of 1,056 filings stating one, 877 say exactly 2.0. Judged against that rather than against zero. Above 10 years nothing is raised at all — no agreement contains such a term, so a figure that large is our extraction being wrong, and we will not publish a finding built on a number we do not believe.

Whether the agreement lets the franchisor end it at will.

• Seriouspermitted

Whether the arbitration or litigation venue is the franchisor's own state rather than yours.

• Worth asking aboutfranchisor's home state

Whether a registration you are licensed lapses inside your franchise term.

• Worth asking aboutexpires within the term

Whether Item 9 imposes a minimum sales, purchase or performance quota, and whether missing it is grounds for termination.

• Standardimposed

57.5% of read brands carry a quota whose breach is stated as grounds for termination, because nearly every agreement lists failure to meet performance standards among them. The term is described rather than flagged; what the quota IS in dollars would be a finding, and no filing states it in a form we can read.

Whether the franchisor or an affiliate takes rebates or other revenue from suppliers you must use.

• Standarddisclosed

On 87.1% of read brands. Common and lawful; it also means their interest in your input costs is not the same as yours.

Whether ongoing support is qualified — 'as we deem advisable', 'from time to time'.

• Standardqualified

On 76.3% of read brands.

Whether you are restricted to goods and services the franchisor approves.

• Standardrestricted

On 99.1% of read brands. This is what franchising is.

Whether the agreement requires the owner to operate the outlet rather than appoint a manager.

• Contextrequired

Whether the franchisor or an affiliate offers to finance any part of your purchase.

• Contextoffered

Neither good nor bad, and listed because it changes who your creditor is.

Whether Item 18 discloses a public figure in the promotion or management of the system.

• Contextdisclosed

Loans charged off as a share of loans that finished — repaid or written off. Loans still running are excluded, because their outcome is not known yet.

• Serious25% or more
• Worth asking about15% or more

Only where at least 20 loans have finished. Below that a single extra outcome moves the rate several points, and we would rather say nothing than publish a rate that thin. The median across brands clearing the bar is 8%.

Where the brand's charge-off rate falls among brands in the same industry group that also clear the finished-loan bar.

• Worth asking aboutin the bottom 25%

Not raised at all where the industry has too few brands with a meaningful record — a position out of three is arithmetic pretending to be a finding.

The share of this brand's loans whose outcome the SBA withheld from the public file.

• Context40% or more

A fact about the dataset, not about the brand. It is here because it limits how much the rate above can carry.