Item 7: Estimated Initial Investment

This section requires a comprehensive table showing the estimated total investment required to open the franchise, including buildout, equipment and working capital.

What is Item 7

Item 7 of the Franchise Disclosure Document provides prospects with a detailed estimate of the total initial investment required to establish the franchised business. It is one of the most referenced Items in the FDD because it outlines the full financial requirements from signing to opening.

Why Item 7 Matters

Item 7 is essential for:

franchisee financial planning
SBA loan underwriting
lender evaluations
franchise comparisons
franchisor credibility

Prospects use Item 7 to assess whether they can afford the business and whether the investment aligns with anticipated returns.

Examiners frequently request revisions to Item 7 because improper calculations can mislead buyers.

What Must Be Included

Item 7 must disclose:

low and high investment ranges
construction and buildout
equipment and fixtures
lease deposits
insurance
professional fees
technology systems
inventory
signage
training and travel
grand opening marketing
three months of working capital

Each cost must include:

estimated range
payment method
who receives the payment
brief explanatory notes
not consider offsets for revenue generated

Examiner Red Flags

You’ll receive state comments if:

estimates appear inconsistent with market conditions
amounts in Item 7 don’t align with Item 5, Item 6 or Item 11
working capital is unrealistically low
buildout numbers don't match industry standards
footnotes lack detail
affiliate payments are omitted

Related Features

Franchise Registration Management
Franchise Territory Mapping
Demographic Analysis
Integrated Document Signing
CRM Tools

Last updated: November 26, 2025

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