How this checklist works
This is a fixed sequence of 42 items in 10 steps. It calculates nothing and scores nothing, and the boxes are not saved, so print it or email yourself a copy before you close the tab. The order is the point. Steps 1 and 2 are gates (screen the brand, then get the complete documents and start the clock). Steps 3 to 6 are analysis you do from paper, calls and your own numbers. Discovery day is step 7, after the FDD read and the franchisee calls, so your questions are specific and the franchisor's presentation cannot set the agenda. Steps 8 and 9 hand the contract and the numbers to a franchise attorney and an accountant. Step 10 is a dated go or no-go decision that you can check against the earlier boxes.
Two timing rules, as the rule is written
The FTC's Franchise Rule,16 CFR 436.2, sets two waiting periods, and they do different jobs.
- 14 calendar days. The franchisor must furnish its current disclosure document at least 14 calendar days before you sign a binding agreement with it or make any payment to it or an affiliate in connection with the sale. A "reservation deposit" is a payment, so it starts the same clock.
- 7 calendar days. This applies only when the franchisor unilaterally and materially changes the terms of the basic franchise agreement or related agreements attached to the FDD. It must then give you each revised agreement at least seven calendar days before you sign it. The rule adds that changes arising from negotiations you start do not trigger the seven days. So the period is not a general "ready-to-sign set" right, and if you negotiate terms, ask your attorney what the franchisor must still deliver.
Paragraph (c) says how delivery counts. Hand delivery, fax, email, or directions for accessing the document online count if done by the required date. A paper or disk copy sent by first-class mail counts only if sent at least three calendar days before the required date.
Worked example: earliest signing date
Assume, for illustration, that the franchisor emails you a complete FDD on Monday, October 5, 2026. Fourteen calendar days later is Monday, October 19, so October 19 is the earliest date the rule lets you sign or pay, counted from the delivery date. If you want no room for a counting dispute, treat October 20 as the first day and confirm with your attorney how the franchisor counts. Now assume the same FDD is mailed by first-class mail on October 5. The mailing must precede the required date by three days, so the required date is 14 days before signing and the mailing date is 17 days before signing: October 5 plus 17 days is October 22. The same document, sent a different way, moves your earliest signing date by three days. Write the delivery method and date on the first page of your copy, as step 2 says.
Reading the five focus items
16 CFR 436.5 fixes what each item must contain, so you know what a complete answer looks like.
- Item 7 must include a line titled "Additional funds" for expenses during the initial period of operations, and the rule calls a reasonable initial period "at least three months or a reasonable period for the industry." It must also describe the factors and experience the franchisor used to set the amount. If your own ramp to break-even is longer than that period, the gap is yours to fund.
- Item 19 is the only place a franchisor may state financial performance, apart from two narrow exceptions: the actual records of an existing outlet you are considering buying, or a written supplement about a particular location or circumstances. If the item says the franchisor makes no representation, a verbal earnings figure is outside the rule. The FTC'sconsumer guide puts it the same way.
- Item 20 must list the names, addresses and telephone numbers of all current franchisees, and the last known contact details for every franchisee whose outlet was terminated, canceled, not renewed or otherwise ceased in the last fiscal year, or who has not communicated with the franchisor within 10 weeks of the issuance date. That is your call list.
- Item 21 requires the franchisor's balance sheets for the previous two fiscal year-ends and statements of operations, equity and cash flows for the previous three fiscal years, audited by an independent CPA, with limited exceptions in paragraph (u)(2). The guide says an accountant can help you make sense of those statements, so hand them over in step 9.
Worked example: choosing calls so you are not steered
Suppose, hypothetically, that Item 20 lists 180 current franchisees and 14 franchisees who left in the last fiscal year, and you plan 10 calls with current owners. Sort the current list by opening date and take every 18th name (180 / 18 = 10). That gives a spread of new and old units without your choosing, and the franchisor's suggested references are then a bonus rather than the sample. Add calls to at least five of the 14 former franchisees, and open every call with the same anchor question so answers compare. The FTC guide says prior owners can tell you the problems they had with their outlet and how they did, and the rule makes their contact information part of the FDD. Ask each former franchisee at the start what they are free to discuss.
If you plan to borrow
Step 1 tells you to check the SBA Franchise Directory early. The SBA's lender manual,SOP 50 10 8.1 (effective October 1, 2026), says that if the brand meets the FTC definition of a franchise it "must be on the Directory in order to obtain SBA financing," and that a listing is not an endorsement or a guaranty of the brand's success. For a Standard 7(a) loan, the same manual tells the lender to review credit information about the franchise, such as the number of failed franchisees and the cash flow projections the franchisor provides. Item 20's terminations, non-renewals and closures columns are where that kind of figure comes from, so the analysis you do in step 3 also prepares you for the lender's questions.
Sources retrieved September 29, 2026. Education only, not legal or financial advice.