FDD Risk Factors We Analyze
Failure Rate
Item 22 — system-wide closings as % of total units. Below 5% = green, 5–10% = yellow, above 10% = red.
Royalty Burden
Item 6 — effective royalty (royalty + ad fund). Above 10% effective = warning flag.
Litigation History
Item 3 — civil litigation history. Pattern of franchisee lawsuits = risk factor.
Franchisee Satisfaction
Item 20 — if included. Below 60/100 = investigate further.
Growth Trajectory
Item 20 — net franchise unit change. Negative = system contraction.
Transfer Restrictions
Item 17 — franchise transfer and renewal terms. Restrictive = exit risk.
Analyze a Franchise
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How to read FDD risk factors
The FDD Risk Analyzer evaluates 6 key risk areas from franchise disclosure documents. For a complete analysis including red flag identification and Item 19 comparison, explore our FDD checker tool. FDD Checker →