FDD Item 10
Financing
FDD Item 10 discloses any financing arrangements the franchisor or its affiliates offer to franchisees. This includes direct financing of the initial fee, equipment, or other components of the investment, and any third-party programs the franchisor brokers or refers.
Why It Matters
Item 10 tells you whether the franchisor offers in-house financing and what the terms are. Franchisor-offered financing is rare today; most buyers use SBA loans or third-party lenders for the bulk of the investment.
What Item 10 Must Disclose
- Whether the franchisor or affiliates offer financing for any portion of the investment
- Terms of any direct financing offered (rate, term, collateral)
- Third-party financing programs the franchisor brokers or refers
- Any default consequences specific to franchisor-provided financing
What to Look For
- Aggressive in-house financing terms — sometimes indicates a franchisor struggling to sell franchises at full price
- Third-party referrals to non-SBA lenders — verify the lender's reputation independently
- Default provisions that allow franchisor-affiliated lenders to terminate the franchise agreement
Go Deeper
FDD Item 10 Explained: Should You Take Franchisor Financing?
Item 10 discloses any financing the franchisor or its affiliates offer to franchisees. The pitch sounds convenient — let the brand finance your franchise fee, your build-out, your equipment. The trade-offs are not always obvious.