According to FRANdata, 82% of franchise failures trace back to inadequate pre-purchase research. Not bad luck. Not a bad market. Bad research.

The good news: the information you need to make a smart decision is legally required to be disclosed to you. The FTC's Franchise Rule mandates that every franchisor hand you a Franchise Disclosure Document — a 200–400 page document containing 23 items of required information — at least 14 days before you sign anything.

Most buyers read fewer than five of those 23 items. Here are the 10 questions you must answer before you write a check.

1. What Does Item 19 Actually Show?

Item 19 is the Financial Performance Representation — the section where franchisors can (but are not required to) share earnings data. Only about 50% of franchisors provide Item 19 data.

If a franchisor does not include Item 19, ask why. If they do, read it carefully. Look at median earnings, not averages — a few high performers can inflate the average significantly. Ask whether the figures represent gross revenue or net profit. Those are very different numbers.

2. What Does Item 20 Say About Closures?

Item 20 lists every franchise outlet that opened, closed, transferred, or was terminated in the past three fiscal years. This is the most honest data in the entire FDD.

Calculate the closure rate yourself: divide closures by total outlets. Industry average annual turnover is approximately 15% (FRANdata). Any brand above 20% closures deserves serious scrutiny. High turnover is not always a red flag — but it always requires an explanation.

3. What Are the Total Fees — All of Them?

The franchise fee is just the entry ticket. Item 6 lists all fees, and Item 7 breaks down the estimated total initial investment. For most franchises, the real cost looks like this:

• Franchise fee: $35,000–$50,000 (average)
• Total initial investment: $150,000–$500,000+
• Ongoing royalties: 5–8% of gross revenue
• Marketing/advertising fund: 2–4% of gross revenue
• Technology fees, training fees, renewal fees: varies widely

Add it all up before you compare franchises. A lower franchise fee with higher royalties can cost you far more over a 10-year term.

4. What Is the Territory Protection?

Item 12 covers territorial rights. Read it carefully. Some franchises offer exclusive territories — no other franchisee can open within a defined radius. Others offer only "protected" territories with carve-outs for non-traditional locations (airports, stadiums, online sales).

Encroachment — a franchisor opening a competing location near yours — is one of the most common sources of franchisee disputes. Understand exactly what you are and are not protected from before you sign.

5. What Do Current Franchisees Say?

Item 20 gives you the contact information for every current and former franchisee. Most buyers never call them. That is a mistake.

Call at least 10 current franchisees and 5 former ones. Ask them: Would you buy this franchise again? What does the franchisor do well? What do they do poorly? How long did it take to reach profitability? What do you wish you had known?

Former franchisees are especially valuable — they have nothing to lose by being honest.

6. What Is the Renewal and Exit Process?

Item 17 covers the franchise agreement's renewal, termination, and transfer provisions. Some key questions:

• What does renewal cost, and on what terms?
• Can the franchisor terminate your agreement without cause?
• If you want to sell your franchise, what approval is required and what fees apply?
• Does the franchisor have a right of first refusal to buy you out?

Your exit options matter as much as your entry terms. A franchise you cannot sell is a job, not an investment.

7. Is the Franchisor Financially Healthy?

Item 21 contains three years of audited financial statements. You do not need to be an accountant to read them — you need to look for a few key signals:

• Is the franchisor profitable, or burning cash?
• Is their revenue primarily from royalties (healthy) or from selling new franchises (a warning sign)?
• Do they have significant debt or litigation liabilities?

A franchisor that depends on new franchise sales to stay solvent is a franchisor that will keep selling franchises even when the market is saturated.

8. What Training and Support Is Actually Provided?

Item 11 covers training and support. Read it, then verify it with franchisees. Ask specifically:

• How long is initial training, and where does it take place?
• What ongoing support is available after opening?
• Is there a dedicated field support representative, and how many franchisees do they cover?
• What happens if you struggle in the first 90 days?

The gap between what franchisors promise in Item 11 and what franchisees actually experience is often significant.

9. What Litigation History Exists?

Item 3 discloses pending and prior litigation involving the franchisor. Look for patterns — multiple lawsuits from franchisees alleging the same issues (earnings misrepresentation, encroachment, wrongful termination) are a serious warning sign.

One or two resolved disputes over a 10-year history is normal. A pattern of franchisee litigation is not.

10. Does the Brand Have a Viable 10-Year Future?

This question is not in the FDD — it requires your own research. Ask yourself:

• Is this industry growing or contracting?
• Is the brand differentiated, or competing in a crowded category?
• How has the brand performed through economic downturns?
• Is the business model recession-resistant?

A franchise is a 10-year commitment. The brand you buy today needs to be relevant in 2036.

Use FDD Score™ to Do the Heavy Lifting

Reading a 400-page FDD and knowing what to look for is a skill that takes years to develop. BIZLINX's FDD Score™ analyzes any FDD and returns a scored assessment of risk factors, financial health, franchisee turnover, and litigation history — in minutes.

It does not replace your due diligence. It accelerates it — so you spend your time on the questions that matter most, not hunting through footnotes.

The 10 questions above are your framework. FDD Score™ is your research partner. Together, they give you the information you need to make a decision you will not regret.