What FDD Item 19 actually tells you (and what it hides)
Item 19 of the Franchise Disclosure Document is the only revenue claim a franchisor is legally allowed to make. Most use the MEDIAN of top-quartile units — meaning half of all units do worse. Always model the median (or 25th percentile) before signing.
- • Ask for unit-level P&Ls from 3+ existing franchisees in your DMA, not just the FDD.
- • Top-quartile AUV doesn't mean top-quartile profit — the best-revenue units are often the highest-rent locations.
- • FDD only shows revenue; you must back into COGS, labor, and royalty yourself — that's what this calculator does.
- • Royalty + ad fund of 10%+ combined makes it nearly impossible to clear 20% cash-on-cash unless AUV is well above median.
SBA 7(a) financing for franchise purchases
Most franchises listed in the SBA Franchise Directory qualify for 7(a) loans with 10–20% down, 10-year amortization, and rates of Prime + 2.75% to Prime + 4.75% (currently ~10–12%). DSCR of 1.25 is the underwriting floor — meaning EBITDA must be at least 1.25× annual debt service.
- • Pre-qualify with an SBA Preferred Lender BEFORE signing the franchise agreement.
- • Seller / franchisor financing can bridge 5–10% of the down payment but counts as debt in DSCR math.
- • Personal guarantee is required — your home equity is on the line.
When a franchise beats starting from scratch
Franchises trade upside for risk reduction. 5-year survival rate for franchised concepts is ~70–85% vs ~35–45% for independent restaurants. Pay for the playbook IF AUV and prime cost work — don't pay 6%+ royalty forever for a brand that doesn't drive incremental traffic in your market.
Related guides
Long-form playbooks on the same topic, written by the RevenueLab editorial team.
Franchise ROI Benchmarks 2026: Cash-on-Cash, Payback, and Resale Multiples by Category
What good actually looks like — payback period, unlevered cash yield, SBA-levered cash-on-cash, and resale SDE multiple — for food, service, fitness, auto, and senior care franchises.
Read the guideFranchise vs Starting a Business: Which Pencils Better in 2026?
A side-by-side on survival rates, capital needs, cash-on-cash returns, and resale multiples — and the operator profile each path suits. With the math, not just opinions.
Read the guideHow Much Does a Franchise Cost in 2026? Full Breakdown by Tier (with Real Numbers)
Every line item — franchise fee, build-out, equipment, training, working capital, royalty, ad fund, reserve — across $50K, $250K, $500K, and $1M+ tiers. No marketing fluff.
Read the guideFAQ
How much do franchise owners actually make?
Median owner take-home from a single-unit food franchise runs $60K–$150K/year. Multi-unit operators clear $250K+ once they're past unit 3. Service franchises (cleaning, restoration, in-home care) skew higher because there's no rent and labor scales — but require active sales. FDD Item 19 shows revenue; this calculator shows the cash flow number that matters.
What is a good ROI on a franchise?
15–25% cash-on-cash in Year 1 is the institutional threshold. 25%+ is strong. Anything under 10% means you're buying a job (you'd earn more as a manager elsewhere) — only acceptable if you're building toward 3+ units where ROI compounds.
Should I use SBA financing to buy a franchise?
Almost always yes. SBA 7(a) lets you put 10–20% down vs 25–35% conventional, freeing equity for working capital. The catch: 10-year amortization at ~10–12% rates means heavy debt service in years 1–3. The DSCR output here tells you if you'll qualify.
What's the difference between royalty and ad fund?
Royalty (typically 5–8%) goes to the franchisor as profit and brand IP fee. Ad fund (typically 1–4%) is pooled into national/regional marketing — you may or may not see direct benefit. Both are deducted from gross revenue BEFORE you pay yourself.
How long until a franchise pays back?
Median food/retail franchise: 3–5 years to recover total cash invested. Service franchises with low CapEx: 18–36 months. The Payback Period output above models this against your specific deal — anything beyond 6 years is a red flag unless you're underwriting for terminal value (selling the unit).
How this calculator is built
Independently maintained
Written by Sam Doshi and the RevenueLab editorial team. We don't sell the data feeds this tool is built on.
Sourced from primary data
Benchmarks come from public AdSense / Stripe / IRS disclosures and reader-submitted data — never third-party "$X per view" claims. Full methodology.
Last reviewed
June 2026. We re-check every figure on the platform on a rolling quarterly cycle.
Editorial standards
See our editorial policy and disclaimer. Results are estimates, not advice.