Beyond the Binder: Item 22 – Contracts

When prospective franchisees think “FDD,” they tend to think about Item 7 (costs), Item 19 (earnings), Item 20 (outlet counts), and Item 3 (litigation). But there is a sleeper Item. One that rarely gets the attention it deserves yet may have the biggest impact on your daily life for the next 5, 10, or even 20 years.

That item is Item 22: Contracts.

If the FDD is the syllabus, Item 22 is the stack of binders, appendices, and exhibits that actually govern your relationship. Most people glance at it. Few read it. Almost nobody fully understands what they’re signing.

That’s why Item 22 exists and why this installment of Beyond the Binder matters.

🔍 What Item 22 Actually Requires

Under the FTC Franchise Rule, franchisors must attach all agreements you’ll be required to sign as part of becoming a franchisee. This typically includes:

• Franchise Agreement

• Multi-unit or area development agreements

• Personal guaranty

• Lease riders or required lease addenda

• Software licenses and technology stack contracts

• Supplier agreements (mandatory or preferred)

• Arbitration agreements

• Non-compete/non-solicit agreements

• Transfer and renewal agreements

• Financing agreements (if the franchisor or an affiliate finances anything)

• Confidentiality agreements (NDAs)

• Operations manual acknowledgments

• Consent to background checks

• Required vendor terms and conditions

• Any other agreement that is “material to the franchise relationship”

If you’re required to sign it, Item 22 must include it. If it isn’t included? That’s a problem, and potentially a violation.

🔎 Why Item 22 Matters More Than Most Franchisees Realize

Item 22 is the bridge between disclosure and contractual obligation. Whatever is said in the glossy brochure, the webinar, or by the franchise salesperson does not control the relationship.

Only the contracts do. And those contracts nearly always favor one party, and it’s not the franchisee.

Here’s why Item 22 deserves your full attention:

1. It’s where rights go to die.

All the things you think you were “promised” informally? If they’re not in the contract, they do not exist.

2. It’s where financial risk becomes real.

Liquidated damages. Minimum royalties. Litigation costs. Fee acceleration. You may not fully understand these until you read your agreements line by line.

3. It’s where franchisor power is concentrated.

Approvals. Terminations. Renewals. Transfers. Force majeure. Your day-to-day operations are governed here, not in the marketing packet.

4. It is one of the most common places franchisors violate the rule.

Brands sometimes require signing:

• an updated agreement not disclosed in the FDD,

• addendums not included in Item 22,

• or side letters that should have been attached.

This is not only improper, it may invalidate the sale.

📚 What You Should Look for in Item 22

To help prospective franchisees avoid the “signing blind” trap, here are the most important areas to analyze:

A. The Franchise Agreement

This is your constitution. Read it like your livelihood depends on it, because it does.

Key sections to review:

• Term & renewal rights

• Fees & minimums

• Territory rights (or lack thereof)

• Supply chain requirements

• Operations manual control

• Default & remedy clauses

• Audit rights

• Franchisor modification authority

Check whether anything you were told verbally is contradicted by the agreement. Spoiler: it often is.

B. Guaranty Agreements

These are usually personal guarantees with:

• No cap

• No expiration

• Joint and several liability

This means the franchisor can pursue you, and oftentimes your spouse, not just the business entity.

C. Software & Tech Contracts

Many systems outsource POS, CRM, labor management, or inventory platforms.
These contracts often include:

• Separate fees

• No refund policies

• Multi-year commitments

• Limited tech support

• Vendor-friendly arbitration clauses

If it’s required, Item 22 must attach it.

D. Real Estate & Lease Requirements

Lease riders often:

• Give the franchisor step-in rights

• Grant them access to your financials

• Require landlord notifications

• Allow unilateral relocation decisions

Make sure every rider is attached—and every obligation is understood.

E. Restrictive Covenants

Most include:

• Pre-term and post-term non-competes

• Customer non-solicit restrictions

• Key-employee restrictions

These can follow you for years after you close.

F. Ancillary Agreements

This can include anything from:

• marketing fund agreements

• training agreements

• multi-unit development schedules

• supplier agreements

• build-out or architectural approvals

Each one contains obligations that can materially affect your costs and freedoms.

🚨 Red Flags in Item 22

Item 22 is often where some of the most concerning issues hide. Watch for:

• Missing agreements you are told you’ll have to sign later

• Blank placeholders (“to be provided at signing”)

• Updated agreements required at closing but not in the FDD

• Supplier contracts not included even though they’re mandatory

• Technology commitments with undisclosed fees

• Lease riders not provided until after you secure a location

• Franchisor rights to change agreements unilaterally

• Documents uploaded piecemeal or “just before signing”

• Side letters that weren’t disclosed

If anything feels hidden, rushed, or incomplete…hit pause.

🧭 How to Analyze Item 22 Like a Pro

Before you sign any franchise agreement:

1. Map it.

Create an index of every agreement included. Check it against everything the franchisor says you’ll sign.

2. Compare versions.

Ask if the agreements are the most recent versions. Compare dates with Item 23 receipts.

3. Highlight conflicts between agreements.

Franchise agreements often trump development agreements. Supplier contracts often trump marketing claims.

4. Request missing documents early.

Refuse to sign anything that wasn’t disclosed in Item 22.

5. Have a franchise attorney review every document.

Not a lawyer who “does business contracts.” A franchise specialist. This is not the time to cut corners.

6. Validate with current and former franchisees.

Ask them how the franchisor enforces the agreements. Contracts tell you what can happen, owners tell you what does happen.

🧩 Why Item 22 Is the Bridge Between Theoretical Risk and Actual Risk

Think of the FDD as the instruction manual. Item 22 is the warranty. And most warranties are written to protect the manufacturer not the buyer.

If the Franchise Agreement says one thing and the salesperson said another, guess which controls?

Item 22.

If the franchisor uses contract terms to override something said during the process?

Item 22.

If the franchisor exercises power to terminate, take over, accelerate fees, or deny renewal?

Item 22.

This is where the franchise relationship becomes real. It’s where a franchise goes from an idea…to a legally binding commitment.

And once you sign, there is no “undo” button.

💬 Final Thought

In franchising, people spend far more time picking a paint color than reading the agreements that control their business, their schedule, their finances, their brand, and their legal rights.

Item 22 is the fine print, yes. But don’t let the term “fine print” fool you.

This is the heart of the deal.

If you read nothing else cover to cover…read Item 22.

Your future self will thank you.

Franchise Reality Check™ makes no representations or warranties regarding the accuracy or completeness of information provided in this post. Nothing contained herein should be construed as legal, financial, or investment advice. Always consult with qualified professionals before making decisions regarding franchise or business opportunities.