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Read every covered payment, not just the headline fee

A cleaning offer might include an initial fee, software setup paid to a related company and training charges. Identify the recipient, amount or formula, when the commitment arises and the stated refund conditions. Where fees differ, the required range or formula and the reasons for differences matter.

The actual offer supplies the refund policy. This example creates no right to recover a payment if a site is rejected, training stops or the launch is cancelled.

Sources: Federal Trade Commission: Item 5: Initial fees

Check timing before taking money

Calling a payment a reservation fee does not determine whether a disclosure duty applies. Check its real purpose, recipient and timing before collecting it.

Item 7 addresses the broader opening investment. Rent and third-party fit-out do not disappear because they are outside the headline fee.

Sources: Federal Trade Commission: Item 5: Initial fees Federal Trade Commission: section-436.2

Scope

  • This explains the selected federal disclosure item. State and territorial requirements and the terms of the particular offer remain separate.

Next step

Compare the offer’s pre-opening commitments and refund terms with the agreements, broader investment estimate and disclosure timetable.

Sources & review notes

Federal Franchise Rule

FTC overview · Compliance Guide · Guide PDF · Current regulation

The Compliance Guide is May 2008 explanatory guidance. The current regulation and later official updates control current requirements and dollar amounts; state and territorial rules are separate.

The source records distinguish access dates from substantive review dates. Updating an explanation does not itself recheck the law.

16 CFR §436.5(e): FDD Item 5

Federal Trade Commission

Passage, dates and research notes

primary · Item 5: Initial fees

Disclose the initial fees and any conditions under which these fees are refundable.

Accessed: 2026-11-12T20:51:48.875978+00:00 · Meaning reviewed: 2026-11-12 · Next review target: 2026-12-12

Current substantive item read in full from current eCFR. This guide explains selected management implications; it is not a substitute for all prescribed disclosure text.

16 CFR §436.6: FDD preparation and records

Federal Trade Commission

Passage, dates and research notes

primary · section-436.6

Respond fully to each disclosure Item.

Accessed: 2026-11-12T20:51:48.875978+00:00 · Meaning reviewed: 2026-11-12 · Next review target: 2026-12-12

Current eCFR displayed through 2026-11-09; eCFR is authoritative but not the official legal edition.

16 CFR §436.2: Federal disclosure timing

Federal Trade Commission

Passage, dates and research notes

primary · section-436.2

at least 14 calendar-days

Accessed: 2026-11-12T20:51:48.875978+00:00 · Meaning reviewed: 2026-11-12 · Next review target: 2026-12-12

Current eCFR displayed through 2026-11-09; eCFR is authoritative but not the official legal edition.

Detailed rule records (1)
FDD Item 5: Initial fees Source checked

Item 5 covers fees, payments and commitments for goods or services received from the franchisor or an affiliate before opening, with refund conditions. If fees are not uniform, the required range or formula and determining factors matter. The franchise fee alone is not the full initial investment.

When to check: Preparing, updating or comparing an FDD. Source review: 2026-11-12.

16 CFR §436.5(e): FDD Item 5
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