What is an Item 7 Estimated Initial Investment FDD Disclosure?
Pursuant to the Federal Franchise Rule, Franchisors must include in the FDD information containing an estimate of your initial investment. The information contained in “Initial Investment Disclosure” must be located in FDD Item 7 and must be structured as an “easy to read table”, explaining and outlining, among other things, an estimated high and low calculation of the initial fees that a Franchisee should expect to incur in the establishment of a Franchise. Some of the “Initial Investment” expenses include:
- Initial Franchise Fee,
- Grand Opening Expenses,
- Architectural Fees,
- Leasehold Improvements,
- Initial Inventory,
- Deposits, and
- Additional Reserves and many others.