We’re covering another section in the Franchise Disclosure Document (FDD), and this one is a biggie … this is section/item number seven. This section/item is really where a lot of people spend a lot of time evaluating what their total investment is going to look like in acquiring and running this franchise on an ongoing basis.
Previously we've kind of given you the framework for section/item five and section/item six. This is really giving you the broad-stroke picture of what it's going to look like for you in year one, the total investment that you're going to need to come up with. And it's also going to give you some framework for what your expenses are going to look like on an ongoing basis. There's a lot here and it's truly one of the most critical sections of the Franchise Disclosure Document.
First off this section is based on real-life data. Franchisors must disclose to you how the franchisees and their system are doing in this section/item. Now, not individually such as Stacey did this, Dave did this, Bob did this, Sarah did that. No, but they collaborate/consolidate all that information and they report it back in section/item seven as an investment range. Sometimes you'll see that the range is very close in the minimum/maximum numbers, but the idea is that it gives you a low and a high.
Now, some of the variables where there may be a larger range are when there's real estate involved. For instance, there are different classes of real estate and different sections of the country and that's just going to vary so much.
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