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Read every covered payment, not just the headline fee
A cleaning offer might include an initial fee, software setup paid to a related company and training charges. Identify the recipient, amount or formula, when the commitment arises and the stated refund conditions. Where fees differ, the required range or formula and the reasons for differences matter.
The actual offer supplies the refund policy. This example creates no right to recover a payment if a site is rejected, training stops or the launch is cancelled.
Check timing before taking money
Calling a payment a reservation fee does not determine whether a disclosure duty applies. Check its real purpose, recipient and timing before collecting it.
Item 7 addresses the broader opening investment. Rent and third-party fit-out do not disappear because they are outside the headline fee.
Scope
- This explains the selected federal disclosure item. State and territorial requirements and the terms of the particular offer remain separate.
Next step
Compare the offer’s pre-opening commitments and refund terms with the agreements, broader investment estimate and disclosure timetable.
Sources & review notes
Federal Franchise Rule
FTC overview · Compliance Guide · Guide PDF · Current regulation
Federal Trade Commission
Passage, dates and research notes
primary · Item 5: Initial fees
Disclose the initial fees and any conditions under which these fees are refundable.
Current substantive item read in full from current eCFR. This guide explains selected management implications; it is not a substitute for all prescribed disclosure text.
Federal Trade Commission
Passage, dates and research notes
primary · section-436.6
Respond fully to each disclosure Item.
Current eCFR displayed through 2026-11-09; eCFR is authoritative but not the official legal edition.
Federal Trade Commission
Passage, dates and research notes
primary · section-436.2
at least 14 calendar-days
Current eCFR displayed through 2026-11-09; eCFR is authoritative but not the official legal edition.
Detailed rule records (1)
Item 5 covers fees, payments and commitments for goods or services received from the franchisor or an affiliate before opening, with refund conditions. If fees are not uniform, the required range or formula and determining factors matter. The franchise fee alone is not the full initial investment.
16 CFR §436.5(e): FDD Item 5Keep this reading in your learning library.
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