STUDY · INITIAL FEE · ITEM 5
Few franchisors state that the fee is final
The initial franchise fee in a brochure is the published price. Item 5 of every Franchise Disclosure Document must describe the conditions under which that fee is not uniform, and franchisors who varied it in the prior year often print the range they collected.
We read Item 5 across 256 franchise systems. 3 state that the fee is uniform; 37 disclose collecting less than the top of their range; the rest name discount programs or say nothing either way.
3
state in writing that the fee is imposed uniformly.
37
disclose collecting less than the top of their own fee range.
193
name discount programs but disclose no collected range — flexibility without a number.
Counted by brand, not by filing. 3 of 256 is 1%. The other systems either disclose some flexibility or do not address it; not addressing it is not a statement that the fee is fixed.
The ground named most often is buying more than one unit — 73% of systems name a multi-unit or development break, against 54% naming a veteran program. The veteran systems get their own list, shown with each brand's SBA loan record.
| Ground for a discount | Systems | Share |
|---|---|---|
| Multi-unit / area development | 187 | 73% |
| Veteran / VetFran | 137 | 54% |
| Existing franchisee / renewal | 78 | 30% |
| Promotional / emerging-brand | 64 | 25% |
| Transfer / resale | 41 | 16% |
| Conversion of existing business | 30 | 12% |
| Family / employee | 7 | 3% |
| Diversity initiative | 7 | 3% |
These franchisors disclosed the range of initial fees they collected in their most recent fiscal year, and the bottom of that range sits below the top. Amada Senior Care collected as little as $0 against $57,000. The median gap across the group is 50%.
The loan-record column compares each brand's charge-offs on SBA loans approved in FY2020 or earlier with what franchise loans approved in the same years produced (1.0× is the same rate). It is shown only with at least 30 such resolved loans. A brand that discounts deeply and also defaults more often than expected deserves a closer look; the discount alone does not explain why.
| Brand | Collected as low as | Against | Gap | SBA loan record |
|---|---|---|---|---|
| Amada Senior Care | $0 | $57,000 | 100% † | too few seasoned loans |
| COBBLESTONE SUITES | $0 | $45,000 | 100% † | too few seasoned loans |
| ENGEL & VOLKERS | $0 | $35,000 | 100% † | too few seasoned loans |
| IHOP | $0 | $50,000 | 100% † | 0.4× expected (15 of 208 resolved) |
| Mathnasium Centers | $0 | $49,000 | 100% † | 0× expected (0 of 42 resolved) |
| PHENIX SALON SUITES | $0 | $52,500 | 100% † | too few seasoned loans |
| Premier Pool Service | $0 | $111,250 | 100% † | no SBA loans |
| Fleet Clean | $10,000 | $150,000 | 93% | too few seasoned loans |
| PRISM SPECIALTIES | $3,500 | $50,700 | 93% | too few seasoned loans |
| CANTEEN | $3,250 | $25,000 | 87% | too few seasoned loans |
| THE MAIDS | $20,616 | $134,925 | 85% | 1.2× expected (13 of 75 resolved) |
| AQUA-TOTS SWIM SCHOOLS | $10,000 | $50,000 | 80% | too few seasoned loans |
| Potbelly Sandwich Shop | $10,000 | $40,000 | 75% | too few seasoned loans |
| WILD BIRDS UNLIMITED | $5,000 | $20,000 | 75% | 0.3× expected (4 of 98 resolved) |
| Speedy Freight | $37,125 | $124,550 | 70% | no SBA loans |
| SQUEEGEE SQUAD | $49,000 | $149,030 | 67% | too few seasoned loans |
| CODE NINJAS | $20,000 | $40,000 | 50% | 1.5× expected (12 of 74 resolved) |
| Cold Stone Creamery | $10,000 | $20,000 | 50% | 1.4× expected (285 of 912 resolved) |
| OASIS SENIOR ADVISORS | $40,000 | $80,000 | 50% | too few seasoned loans |
| POSTNET | $19,975 | $39,950 | 50% | 1.1× expected (43 of 215 resolved) |
| SERVICEMASTER CLEAN | $16,250 | $32,500 | 50% | 0× expected (0 of 75 resolved) |
| SERVICEMASTER RESTORE | $36,250 | $72,500 | 50% | 0.5× expected (20 of 243 resolved) |
| WALK ON'S SPORTS BISTREAUX | $30,000 | $60,000 | 50% | no SBA loans |
| MERRY MAIDS | $27,500 | $49,500 | 44% | 0.2× expected (3 of 86 resolved) |
| MOTTO MORTGAGE | $20,000 | $35,000 | 43% | too few seasoned loans |
| FranNet | $15,000 | $25,000 | 40% | too few seasoned loans |
| Buddy's Home Furnishings | $25,000 | $39,900 | 37% | too few seasoned loans |
| PET EVOLUTION (UNIT) | $39,000 | $59,000 | 34% | no SBA loans |
| Hudson Valley Swim | $39,500 | $59,500 | 34% | too few seasoned loans |
| HALAL GUYS (THE) | $40,000 | $60,000 | 33% | too few seasoned loans |
| Heights Wellness Retreat | $34,500 | $49,500 | 30% | 2.0× expected (17 of 78 resolved) |
| Fly Dance Fitness | $25,000 | $35,000 | 29% | no SBA loans |
| Dave's Hot Chicken | $30,000 | $40,000 | 25% | too few seasoned loans |
| NATIONAL PROPERTY INSPECTIONS | $27,920 | $34,900 | 20% | too few seasoned loans |
| TACO JOHN'S | $20,000 | $25,000 | 20% | 0.9× expected (20 of 110 resolved) |
| Kitchen Guard | $40,000 | $49,000 | 18% | too few seasoned loans |
| HOUNDS TOWN USA | $44,100 | $49,000 | 10% | too few seasoned loans |
† The low end of the disclosed range is $0 — at least one franchise was granted with no initial fee, and the filing gives no reason we could exclude. Read those as evidence the fee is capable of moving, not as a price anyone can ask for. The cleanest evidence in this table is a gap between two non-zero figures, where a franchisor charged one buyer materially less than another and said so.
Item 5 was isolated from each filing and read on its own. Nearly every franchise agreement carries a boilerplate “waiver of obligations” clause allowing either party to waive or reduce any obligation, and a document-wide search for that language returns a majority of systems while proving nothing about fees. Only the fee section counts here.
A disclosed low end is excluded when the filing itself explains it away — franchises granted by a predecessor, an officer or employee buying a unit, or holders of a brand the franchisor acquired. Those are real numbers, but they are not offers a buyer can ask for, and quoting one at a franchisor would discredit the person quoting it.
The limits. Only 14% of systems here leave a hard paper trail; for the rest the evidence is a named program with no figure attached, or nothing at all. A gap in a collected range is proof a fee moved, not proof any particular buyer can move it — tier, territory and timing all sit inside that number. And a franchisor that discloses no discount may still grant one; Item 5 reports the prior fiscal year, not the current intention.
Source: initial-fee disclosures in state-registered FDDs, read by pipeline; SBA 7(a)/504 FOIA loan outcomes. Loan records use the same vintage-adjusted loss ratio and 30-loan floor as the rest of this site. Full methodology.