FDD Item 6 Explained: The Other Fees That Stack Up

Item 6 is the ongoing-cost table of a Franchise Disclosure Document. Required by the FTC Franchise Rule at 16 CFR 436.5(f), it is a standardized four-column table titled “OTHER FEES” that discloses the recurring and occasional fees a franchisee pays to the franchisor or its affiliates, or that the franchisor collects on behalf of a third party, after signing. Royalties, advertising or brand-fund contributions, technology fees, transfer fees, renewal fees, audit fees, and late fees all live here.

The name “Other Fees” undersells it. Item 6 is not a footnote of minor charges. It is where the largest continuing costs of a franchise are disclosed, which makes it the section that shapes the ongoing economics of the business more than almost any other. Where Item 5 covers the one-time money you pay before opening, Item 6 covers what you keep paying for as long as you operate.

This guide explains the four-column structure, why the fees stack, how the royalty base quietly changes what a percentage costs, and how to read the “may increase” language. It is one stop in the larger walkthrough of how to read an FDD.

What is FDD Item 6?

Item 6 is the disclosure of “other fees,” meaning the fees beyond the initial ones in Item 5. Under 16 CFR 436.5(f), the franchisor must present, in a table, all recurring or occasional fees the franchisee must pay to the franchisor or its affiliates, or that they impose or collect in whole or in part for a third party. The Rule’s own illustrative examples include royalties and fees for lease negotiation, construction, remodeling, additional training, advertising, purchasing cooperatives, audits, accounting, inventory, transfers, and renewals.

Because it is the recurring-cost table, Item 6 is where you learn what it costs to keep operating under the brand, year after year. That is a different question from what it costs to open, which is Item 7, and from what you paid to start, which is Item 5.

The four columns, and what each tells you

The Rule structures Item 6 as a four-column table, and each column answers a specific question.

Type of fee. Column one lists each fee by name: royalty, advertising or brand fund, technology, transfer, renewal, and so on. See 16 CFR 436.5(f)(1).

Amount. Column two states the amount. Where the fee is not a fixed dollar figure, the Rule requires the basis or formula used to compute it, so a percentage-of-sales royalty must show the percentage and the base it applies to. See 16 CFR 436.5(f)(2).

Due date. Column three states when each fee is due, whether weekly, monthly, on transfer, at renewal, or on some other schedule. See 16 CFR 436.5(f)(3).

Remarks. Column four is where the caveats live: whether a fee is paid only to the franchisor or to an affiliate or third party, whether it is refundable, whether it is uniformly imposed, and often whether it can change. See 16 CFR 436.5(f)(4). The remarks column is the one buyers skim and later wish they had read closely.

The fees stack: add up every percentage-of-sales line

The most common way buyers misread Item 6 is to anchor on the royalty percentage and stop. The royalty is rarely the only recurring charge tied to sales. Item 6 usually lists a royalty, and separately an advertising or brand-fund contribution, and often a technology fee, and each of those may be its own percentage of the same sales base.

The reading habit that fixes this: find every line expressed as a percentage of sales and read them together as a combined ongoing draw, rather than treating the royalty as the whole story. Our deeper guide to how franchise royalty fees work walks through the royalty line on its own, but Item 6 is where you see it sitting alongside the other percentage-based fees it stacks with.

Gross sales or net sales? The royalty base changes everything

A royalty percentage means very little until you know what it applies to. The same rate produces a different charge depending on whether the base is “gross sales” or “net sales,” and on exactly what that defined term includes or excludes.

Read the Item 6 remarks and, more importantly, the definition in the franchise agreement to see what sits inside the base. Does it include or exclude sales tax, discounts, refunds, employee meals, and commissions retained by third-party delivery platforms? A broad “gross sales” base generally produces a larger royalty than a narrower “net” base at the same percentage, because there is simply more revenue for the percentage to apply to. This is a mechanic to understand, not a number to compute here, and it is one of the places where two brands with identical headline royalty rates are not actually charging the same thing.

“May increase at our discretion”: read the caps

Some Item 6 fees are fixed by the contract, and some can rise over time. The remarks and amount columns are where you find out which. The FTC’s Franchise Rule Compliance Guide reads the amount and formula requirement to mean that, where a fee may increase, the franchisor should disclose the maximum increase or the formula used to determine it.

So when you see language indicating a fee may increase, or may be set at the franchisor’s discretion, do two things: look for the disclosed cap or formula that bounds the increase, and note that today’s number is not necessarily locked for the life of the agreement. Technology and payment-processing fees are common places for this kind of flexibility. Whether any specific increase provision is enforceable is a legal question for your attorney, not a conclusion to reach from the table.

The brand fund is not the same as a local advertising minimum

Item 6 often discloses two different advertising obligations, and they are easy to conflate. A brand or advertising fund contribution is money you send to the franchisor, which pools it and spends it system-wide. A local advertising minimum is money you are required to spend in your own market, on your own marketing, which never leaves your hands to be pooled.

Both can apply at the same time, and both can appear in Item 6. Read the remarks to see which is which, because they are genuinely different obligations even when both carry the word “advertising.”

Item 6 versus Item 11: the fee versus how the money is spent

There is a clean division of labor between two sections, and knowing it saves confusion. Item 6 discloses that the advertising or brand-fund fee exists and how it is calculated. Item 11 discloses how that pooled fund is actually administered, spent, and accounted for, including whether the franchisor’s own outlets contribute and whether any of the fund is spent on activities that primarily sell more franchises. See 16 CFR 436.5(f) and (k). Read them together: Item 6 tells you the fee, and Item 11 tells you where the money goes.

Two notes for 2026

Two current-events points are worth stating precisely, because both are easy to get wrong.

July 2024 FTC staff guidance. FTC staff issued guidance taking the position that imposing fees not disclosed in the FDD, for example through changes to an operations manual, may raise concerns under the Franchise Rule and Section 5 of the FTC Act. This is informal staff guidance, not a new rule and not a court ruling. It is a reason to pay attention to which Item 6 fees are fixed and which the franchisor reserves the right to add or raise, and a reason to bring that question to your attorney.

This is not the “Junk Fees” Rule. Do not confuse Item 6 franchise fees with the FTC’s separate Rule on Unfair or Deceptive Fees, which took effect May 12, 2025. That rule targets price disclosure in live-event ticketing and short-term lodging. It does not govern franchise FDD fees, and the two are unrelated despite the similar “fees” shorthand.

As of this writing, the core Item 6 disclosure requirement at 16 CFR 436.5(f) remains in force and unchanged. Verify the current regulation and the status of any pending FTC rulemaking before relying on it.

Questions to ask your franchise attorney about Item 6

Item 6 tells you the fees exist and how they are calculated. Whether any of them is reasonable or any clause is enforceable is a question for a professional, not a conclusion to draw from the table.

• Are the royalty and advertising-fund bases defined the same way in Item 6 and in the franchise agreement, and what is and is not deductible from the sales figure the fees are calculated on?
• Can any Item 6 fee be increased at the franchisor’s discretion, is a maximum increase or formula disclosed, and does the agreement limit how fast or how often fees can rise?
• How does the advertising or brand-fund contribution relate to any separate local-advertising minimum, and could you be required to pay both?
• Are any technology, software, or payment-processing fees fixed, or open to being added or changed later, and how does the July 2024 FTC staff guidance bear on fees introduced through the operations manual rather than the FDD?
• Which Item 6 fees are non-refundable, and which are collected by the franchisor versus paid to affiliates or third parties?

When you are comparing several brands, our franchise comparison spreadsheet template gives you columns for the royalty rate and base, the ad-fund contribution, and the other required fees, so the stack is visible side by side.