FDD Item 7 Estimated Initial Investment: Low-High Range & Working Capital
Item 7 is the franchise startup-cost table. The hard part is deciding whether the disclosed range is enough for your site, ramp, and financing.
Last reviewed: May 26, 2026 by the BizLeaseCheck Editorial Team
General information, not legal advice.
Overview
Item 7 discloses the estimated initial investment using a table format. For buyers, the key question is not whether the table has a low and high number; it is whether the range matches the actual site, lease, buildout, financing, staffing, inventory, and opening timeline.
A low-end Item 7 number can be dangerous if your market has higher rent, more expensive construction, longer permitting, larger inventory needs, or slower revenue ramp.
Topics to check
Section 436.5 describes Item 7 as the disclosure for the franchisee estimated initial investment. The table includes categories such as pre-opening expenses, real property, equipment, fixtures, construction, remodeling, inventory, and other listed startup costs where applicable.
Use the disclosed low-high range as a starting point. Then replace assumptions with quotes, lease numbers, lender terms, insurance estimates, payroll ramp, and local permit timing.
16 CFR 436.5 — Item 7Working capital is often the difference between opening and surviving the first months. If the range assumes a short ramp and your location ramps slowly, the business may need materially more cash.
Ask current franchisees whether the disclosed working-capital range was enough, how long they operated before break-even, and which startup costs were higher than expected.
FTC Consumer Guide to Buying a FranchiseItem 7 may include a broad range because real estate, buildout, labor, equipment, inventory, and local conditions vary. A range is not a promise that your unit can open within the low number.
If you have not selected a site, keep the model conservative. If you have a site, ask the franchisor to explain which Item 7 assumptions change because of that site.
16 CFR 436.5 — disclosure itemsStartup cost is not only a franchise question. Lease deposits, tenant improvements, landlord delivery obligations, personal guarantees, SBA loan collateral, and debt-service timing can materially change the cash needed before and after opening.
Build a sources-and-uses schedule that shows equity, debt, franchisor fees, landlord contributions, equipment financing, inventory, opening payroll, contingency, and minimum cash reserve.
FTC Franchise Rule Compliance GuideKey takeaways
- Item 7 is the federal startup-investment table.
- The low number is not a safe budget by itself.
- Working capital should be pressure-tested against ramp timing.
- Site, lease, financing, construction, and inventory assumptions drive the real number.
- Talk to current and former franchisees about actual opening costs.
Official resources
Legal-review notes
Guide confidence marker: High confidence.
- Have an accountant or lender review any source-and-use model before signing loan or franchise documents.
- Construction, lease, permitting, and financing assumptions are fact-specific and outside the federal disclosure baseline.
Frequently asked questions
Does Item 7 tell me exactly what my franchise will cost?
No. Item 7 gives an estimated initial investment range. Your actual cost depends on site, buildout, lease, inventory, labor, financing, ramp timing, and local conditions.
What should I ask franchisees about Item 7?
Ask whether they opened within the disclosed range, which line items ran over, how much working capital they needed, and when the unit reached stable cash flow.
Should I use the low end of Item 7 for financing?
Usually that is risky. Build a conservative budget with contingency and professional review before committing to a loan or lease.