When people search for franchise sales, they are rarely looking for fluff. They are searching for real information that helps them evaluate whether a franchise is a strong, legitimate, well-structured opportunity. One of the most powerful, overlooked parts of the Franchise Disclosure Document that shapes franchise sales is Item 7, the total investment. Item 7 is where trust is built or destroyed. It is where transparency either accelerates your franchise sales or stalls them.
If you want strong franchise sales, Item 7 must be realistic, aligned with actual performance, and honest about what it truly takes to reach break even. Many emerging franchisors underestimate how deeply buyers study Item 7. They compare it against competitors. They take it to lenders. They rely on it to understand what it takes to win. When Item 7 is overly optimistic, buyers quickly become nervous. When it is accurately grounded, franchise sales increase because confidence increases.
The Truth About Working Capital in Item 7
Many franchise attorneys will use the classic rule of thumb: include about three months of working capital. It is the industry standard. The problem is that the industry standard is not always reality.
At FranLift, we have seen hundreds of brands launch and grow. One thing we have learned is simple. You must be honest with the buyer. If your model takes twelve to twenty four months to reach break even, say so. Put that working capital requirement directly into Item 7. Buyers are far better off making a smart decision upfront than discovering six months in that they did not budget enough money. Running out of cash is one of the biggest reasons new franchisees fail. Franchise sales are stronger when expectations match reality.
If you want strong franchise sales long term, the most important principle for Item 7 is truth. If it takes twenty four months, put twenty four months. If it takes twelve months, say twelve. When franchisees feel informed and financially prepared, they succeed at a higher rate, and future franchise sales follow naturally.
Should Owner Salary Be Included in Item 7
This is a long-running debate in franchising. Our view: do not include it. The owner receives the profits at the end of the day, and mixing owner salary with Item 7 creates confusion. Buyers start debating salary versus profit, and it muddies conversations you want to keep clean.
Item 7 should reflect the investment required for the business itself to reach break even. Do not include owner draws or owner compensation. That belongs in the financial performance conversation, not in the startup investment table.
Should You Estimate High or Low
The answer is yes. You need a believable low estimate and a believable high estimate, and both must be grounded in reality. When building Item 7, you should estimate the absolute lowest amount you think the business could reasonably cost, as well as the absolute highest the business could cost based on real-world variations. The reason is simple. Buyers think differently. Some are glass half full. Others are glass half empty. Some will anchor to the low number. Others will lock in on the high number. If both numbers are realistic and represent the true minimum and maximum investment ranges, your franchise sales improve because the buyer can trust that you are being transparent. An unrealistic low number creates mistrust. An inflated high number discourages people unnecessarily. The goal is to give both ends of the spectrum in a way that reflects actual outcomes from real owners in real markets.
Why Item 7 Is a Direct Driver of Franchise Sales
Buyers compare Item 7 across brands before they ever schedule a call. It is the first filtering mechanism. Franchise lenders evaluate Item 7 to determine if a buyer has enough liquid capital and net worth to succeed. Franchise brokers, consultants, and FSOs look at Item 7 to understand whether the model is fundable and attractive to buyers. Item 7 tells the story of your brand’s financial reality. If the story is believable, franchise sales increase.
If Item 7 is unrealistic, franchise sales slow down because buyers lose confidence. Franchising is a trust-driven business. Transparency wins. Over the years, we have seen that the highest performing franchise brands always have one thing in common. Their Item 7 accurately reflects the journey to break even and profitability.
How Buyers Actually Read Item? Buyers rarely read every word of the FDD. But they always read Item 7. The total investment table shapes their entire perception. They look for three things. Does the brand understand its own economics. Does the brand hide costs. Does the brand give realistic expectations for success. This is why Item 7 matters so much for franchise sales. It sets the foundation of trust before the first sales call is ever made.
A Transparent Item 7 Creates Better Franchise Sales Outcomes
Strong franchise sales come from alignment, education, and honesty. A realistic Item 7 does three important things. It helps buyers financially prepare. It filters out buyers who are not ready. It builds confidence for buyers who are. Franchise sales accelerate when the right people enter the pipeline, not when the wrong people slip through because the investment numbers were artificially low.
Your future franchisees will thank you for being upfront. Your validation calls will be stronger because your franchisees were never surprised by costs. Your brand reputation grows faster because owners are confident and financially stable. Strong franchise sales always begin with a strong Item 7.
