Forty terms, one line each, and straight answers to the things people ask us most, including the one about how we get paid.
No. Franchisors pay a placement fee when someone they were introduced to becomes a franchisee. That’s the standard economic model across the entire franchise consulting industry, and it’s why the service is free to you.
No. Franchise fees are set in the FDD and are the same whether you were introduced by a consultant, found the brand yourself, or walked in cold. Franchisors treat consultant introductions as a customer acquisition channel – the cost is already in their budget either way. Some brands actually offer discounts to specific groups, such as veterans through VetFran.
Not unless you ask. That’s a deliberate design decision. Browse the map, save what interests you, and reach out when you’re ready. It’s the main thing that makes us different from broker-first sites where an inquiry triggers a phone tree.
Total investment ranges from roughly $75,000 for some home-services and mobile concepts to well over $1 million for full-service restaurants. The practical question is your liquid capital – typically you need at least 10% of the total project cost as unborrowed equity for SBA financing, and lenders often want more. See our costs guide for the full picture.
Not realistically. SBA-backed lending requires a minimum 10% equity injection on a new business, and every serious funding path requires you to have something at risk. What’s genuinely possible is buying a franchise without liquidating savings – through a ROBS retirement rollover, home equity, or a securities-backed line. That’s different from no money down, and it carries its own risks.
Usually not – franchising exists partly to remove that requirement, and many systems actively prefer buyers with no prior habits in the category. What they do look for is management experience, sales ability, capital, and a willingness to follow a system. Some categories with licensing requirements are the exception.
Three to nine months from first inquiry to opening is typical. FDD review has a 14-day legal minimum; SBA funding takes 45–90 days; build-out is the wild card.
A franchise involves a trademark license, significant control or assistance from the franchisor, and a required payment, along with FDD disclosure requirements. A business opportunity generally involves a product or service package without the same ongoing brand control. They’re different paths to business ownership, with different structures and requirements.
BizExplorer includes both franchise opportunities and other business opportunities, so you can explore more than one path to ownership based on what fits your goals.”
Different trade-offs. A new territory costs less up front and lets you choose your market, but you carry months of pre-revenue burn. An existing business costs more and usually generates cash from day one. Buyers who need income quickly tend toward resales; buyers optimizing for long-term territory value tend toward new builds.
You can generally sell the business, subject to franchisor approval and a transfer fee disclosed in Item 6. Franchise agreements also contain termination provisions and post-termination non-competes in Item 17 – read those before you sign, not after. If you financed with an SBA loan, your personal guarantee survives the business.
There’s no single reliable number, and be skeptical of anyone who quotes one confidently, including the often-repeated claims about franchise success rates, which don’t hold up well to scrutiny. What you can do is look at Item 20 for the specific brand you’re considering: three years of openings, closures, terminations, and transfers, disclosed under federal requirement. That’s real data about the actual system you’d be joining.
Ad fund / Brand fund – A pooled marketing contribution, typically 2% of gross sales, spent by the franchisor on system-wide advertising.
AUV (Average Unit Volume) – Average annual revenue per location across a system. Check which units are included before relying on it.
Area developer / Area representative – Someone granted rights to develop or support multiple units in a defined region.
Broker – A term sometimes used interchangeably with franchise consultant. A franchise broker may represent a portfolio of franchise brands and is typically compensated by the franchisor when a placement is completed. This is different from a licensed business broker who facilitates the purchase or sale of existing businesses.
Consultant– A guide who helps educate you about franchise ownership, understand your goals, and explore businesses that may fit what you’re looking for. Franchise consultants may represent a portfolio of brands and are typically compensated by the franchisor when a placement is completed. BizExplorer consultants are not licensed business brokers.”
Build-out – Construction and leasehold improvements to bring a space to brand standard.
CDC (Certified Development Company) – A nonprofit certified by the SBA to originate the SBA portion of a 504 loan.
Change of ownership – SBA term for a transaction transferring business ownership; carries its own equity injection rules.
Company-owned unit – A location operated by the franchisor rather than a franchisee. Their performance may not be comparable to yours.
Conversion franchise – An existing independent business that adopts a franchise brand.
Debt service coverage ratio (DSCR) – Cash flow available to service debt, divided by the debt payment. Lenders typically want 1.15x or better.
Discovery Day – An in-person visit to franchisor headquarters, late in the process, where both sides make a final assessment.
Equity injection – The unborrowed cash you personally contribute. SBA minimum is 10% of total project cost for a new business.
Exclusive territory – A defined area in which the franchisor agrees not to grant another franchise. Read the reserved rights carefully; “exclusive” is often narrower than it sounds.
FDD (Franchise Disclosure Document) – The federally mandated 23-item disclosure a franchisor must give you at least 14 calendar days before you sign or pay.
Financial performance representation (FPR) – Any claim about actual or potential earnings. Legally permitted only in Item 19.
Franchise agreement – The actual contract. Attached to the FDD as an exhibit under Item 22.
Franchise fee – The one-time initial payment for the right to operate. Median around $42,500.
Franchisee – You, the owner-operator licensed to run the business.
Franchisor – The company that owns the brand and licenses it.
Grand opening marketing – A required launch campaign, often with a minimum spend set by the franchisor.
Gross sales – Total revenue before expenses. Royalties and ad fund are calculated on this, not on profit.
HELOC (Home Equity Line of Credit) – A revolving line secured by your home, sometimes used to fund a franchise.
Item 7 – The FDD’s estimated initial investment table. The most useful single page in the document.
Item 19 – Financial performance representations. Optional; about a third of systems don’t include one.
Item 20 – Outlet counts and franchisee contact lists, including owners who left in the past year.
Liquid capital – Cash and near-cash deployable within roughly 30 days. Not home equity.
Multi-unit operator – A franchisee who owns several locations, usually under a development agreement.
Net worth – Total assets minus total liabilities, home equity included.
Non-compete – A post-termination restriction on operating a competing business. Found in Item 17.
Owner-operator – A model requiring the owner’s full-time involvement, as opposed to semi-absentee.
Personal guarantee – Your personal promise to repay business debt. Required by SBA lenders from any 20%+ owner.
Registration state – A state requiring franchisors to register or file before offering franchises, adding requirements beyond the federal rule.
Resale – An existing franchise location sold by its current owner.
ROBS (Rollover as Business Start-Up) – A structure using retirement funds to capitalize a C corporation without triggering tax or penalty. Legal, IRS-scrutinized, and requires annual Form 5500 filing.
Royalty – Ongoing payment to the franchisor as a percentage of gross sales. Median 6%.
SBA 7(a) – The SBA’s primary guaranteed loan program. Up to $5 million; the most common franchise funding path.
SBA 504 – SBA program for real estate and long-life equipment. Up to $5.5 million on the SBA portion; not usable for working capital.
SBA Franchise Directory – SBA’s list of brands whose agreements meet SBA eligibility criteria. Eliminated in 2023, reinstated effective June 1, 2025. Listing is not an endorsement.
Semi-absentee – A model designed to be run by a general manager with limited owner involvement.
Territory – The geographic area assigned to a franchise, defined in Item 12.
Transfer fee – A fee owed to the franchisor when you sell your business. Disclosed in Item 6.
Unit economics – The revenue, costs, and profit of a single location. The foundation of any realistic financial model.
Validation call – A conversation with an existing or former franchisee during diligence. The highest-value research you can do.
VetFran – An IFA Foundation program under which member brands offer veterans minimum 10%, 15%, or 20% discounts on the initial franchise fee, by tier.
Working capital – Cash to operate before the business sustains itself. Budget six months, not the three most FDDs assume.
Rich and Gail have been doing this long enough to have heard most of them. No pitch, no pressure — and it costs you nothing.
Business ownership, mapped. Explore new and resale opportunities across all 50 states: free, with no sales calls until you ask for one.
Atlas Franchise Advisors
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