What Franchisors Can Do Right Now to Make Their FDDs More Transparent

The last few years have been loud in franchising. State regulators are stepping in. Franchisees are speaking up. Investigations, cease and desist letters, and public disputes are becoming part of the conversation.

But beneath all of the noise lies a simple, unshakeable truth:

👉 Transparency is not the enemy of franchising, it’s the engine that keeps it alive.

For prospective franchisees, transparency is oxygen.
For franchisors, it’s reputation insurance.
And for the entire industry, it’s the only path back to trust.

But what does transparency actually look like on the franchisor side? And how can emerging, growing, or legacy systems strengthen their disclosures in a way that improves validation, reduces disputes, and ultimately increases system stability?

This report breaks down practical, actionable steps franchisors can implement now to create clearer, more honest, and more compliant FDDs and franchise agreements without fear, without defensiveness, and without losing development momentum.

1. Include Real, Actionable Numbers in Item 19 (Not Aspirations)

If there’s one item in the entire FDD that defines franchisee success, it’s Item 19. Yet too many franchisors:

• Avoid it entirely

• Provide cherry-picked data

• Publish “corporate store” numbers that bear no resemblance to franchisee results

• Offer vague ranges so wide they lose meaning

Transparency here is simple: If you are going to claim your model works, show the math.

Franchisors can improve Item 19 by:

✔ Publishing the full distribution of franchisee performance (not just averages)
✔ Disclosing the number of units excluded and why
✔ Separating mature units from new ones
✔ Providing expense ratios, not just revenue
✔ Showing net operating results in addition to topline sales

A transparent Item 19 arms franchisees with realistic expectations and reduces the risk of litigation for franchisors.

2. Clean Up Item 7: Give Franchisees a Realistic Investment Range

One of the biggest drivers of franchisee failure is undercapitalization.
And one of the biggest drivers of undercapitalization is Item 7 that looks nothing like reality.

If your system has never once built a store at the low end of the stated range, remove it.
If construction costs have skyrocketed, update them.
If you know most franchisees land at $475K but you’re still publishing a $220K–$500K range, tighten it.

Just because the FTC Rule doesn’t force you to report actual builds doesn’t mean you shouldn’t.

A franchisor committed to transparency will:

✔ Track real franchisee build-out costs
✔ Disclose median, not just minimum/maximum
✔ Separate landlord TI assumptions from franchisee out-of-pocket
✔ Add a footnote clearly stating: “Most franchisees spend closer to X.”

Investors should know what they’re walking into. If they don’t, that’s not “development”.

3. Strengthen Item 8: Show Exactly How Rebates Work

Item 8 remains one of the least transparent sections of most FDDs and one of the most profitable for franchisors.

If a franchisor receives:

• Supplier rebates

• Volume-based incentives

• Marketing credits

• Revenue from required vendors

• Ownership interests in interlocking entities

…every bit of that should be disclosed clearly.

Transparency practices include:

✔ Listing the exact percentage or dollar value of rebates
✔ Identifying all entities that receive payments
✔ Disclosing franchisee pricing impact
✔ Describing how rebates are used (system support vs. franchisor profit)
✔ Providing a real-world example of how supplier relationships affect margins

Franchisees should never have to guess who makes money when they place an order.

4. Clarify Item 11: Support Is Not a Mystery - Define It

Too many FDDs use vague phrases like:

• “We provide ongoing support”

• “You will receive marketing assistance”

• “Periodic field visits may occur”

Transparency means:

✔ Listing actual support deliverables
✔ Publishing response times
✔ Providing the number of support staff per franchisee
✔ Explaining what “field support” really looks like
✔ Distinguishing required services from optional “upsells”

The line between compliant support and misrepresentation often lies in ambiguity. Clean, clear, specific language solves that.

5. Be Honest in Item 20: Stop Hiding Churn

Item 20 is the heartbeat of franchise system stability. Prospects don’t just want to know how many units opened, they want to know how many closed, transferred, or were reacquired.

To make Item 20 transparent:

✔ Explain why units closed
✔ Disclose reacquisitions separately from terminations
✔ Categorize “never opened” franchises clearly
✔ Provide commentary on trends (declines, high turnover years, etc.)

Nothing erodes trust faster than a franchise system with high churn reducing it to a footnote.

6. Clarify the Franchise Agreement And Explain the Non-Negotiables

The franchise agreement itself is not 150–300 pages long. That page count typically refers to the entire FDD, including Item 22 and all exhibits. A typical franchise agreement runs 40–90 pages, depending on the brand.

But even at that length, franchise agreements are dense, legalistic, and difficult for prospective owners to interpret without specialized counsel.

Transparent franchisors strengthen understanding by:

✔ Including a plain-language summary of the agreement within Item 22
✔ Creating a “What This Means in Practice” section for key clauses (fees, territory, defaults, renewals, transfers)
✔ Identifying non-negotiable provisions and explaining why they’re non-negotiable
✔ Allowing ample review time and discouraging high-pressure deadlines
✔ Removing outdated, punitive, or one-sided clauses during annual updates
✔ Distinguishing clearly between:
 • contractual obligations
 • operational standards
 • marketing claims

The franchise agreement shouldn’t be a trap door hidden inside the FDD, it should be a clear governance document that franchisees can actually understand.

7. State Your Validation Philosophy Clearly

Every franchisor knows franchisees talk and validation will make or break development.

Transparent franchisors:

✔ Encourage open, unfiltered franchisee conversations
✔ Do not script or coach validation
✔ Do not penalize franchisees for honesty
✔ Do not hide former franchisees or block access to them
✔ Provide a list of every franchisee, including those who left

When franchisors manipulate validation, they don’t just mislead buyers they poison the entire system.

8. Resist the Urge to Over-Market

If your sales deck, discovery day, or YouTube videos include:

• AUVs you don’t disclose in Item 19

• Margins not supported by financial statements

• Outlier success stories presented as typical

• Promises of “passive income”

• “Low-cost, high-profit” claims

…you’re not marketing. You’re manufacturing expectations.

Transparent franchisors keep their sales pitch aligned with their disclosure documents. The minute those diverge, credibility disappears.

9. Build a Culture Where Feedback Isn’t Seen as Defamation

This industry will not move forward if every piece of criticism is met with:

• Legal threats

• Defamation accusations

• Franchisee intimidation

• Reputation-management campaigns

Strong systems welcome scrutiny. Weak systems fear it.

Transparency means treating franchisees, journalists, analysts, and advocates as partners in building a healthier system, not adversaries.

10. Commit to Annual Transparency Audits

One of the simplest fixes:
Review your disclosures every year for clarity, not just compliance.

This includes:

✔ Bringing in third-party franchisee feedback
✔ Checking claims against actual outcomes
✔ Comparing FDD items to marketing materials
✔ Updating Item 7 and Item 19 based on real data
✔ Conducting a supplier-relationship audit for Item 8

A transparent franchisor is never afraid to look in the mirror.

Final Thought: Transparency Doesn’t Slow Down Development, It Improves It

Emerging franchisors sometimes fear that honesty will scare buyers away.

But the truth is the opposite:

👉 The strongest operators are drawn to transparent systems.
👉 Franchisees who walk in with eyes wide open are more likely to succeed.
👉 Systems built on clarity scale faster and last longer.
👉 Regulators, lenders, and buyers favor brands that disclose honestly.

Transparency is not a burden. It is a competitive advantage.

And in today’s franchising climate where buyers are more educated, regulators are more active, and franchisees are speaking louder than ever, the brands that embrace transparency will be the brands that survive.

The information provided in this article is for educational purposes and general public-interest reporting. It does not offer legal, financial, or investment advice. Franchise purchasers should consult qualified professionals before making decisions. Franchise Reality Check™ analyzes publicly available documents, including Franchise Disclosure Documents (FDDs), state regulatory filings, and court records. Under Oklahoma Statutes and applicable federal law, analysis of publicly filed franchise documents, commentary on matters of public concern, and reporting on franchise industry practices are protected forms of speech.