FDD Items 5 and 6: Fees and Your Operations Manual
Items 5 and 6 disclose franchise fees. Learn how manual-related fees fit in and what you must disclose.
Key takeaways
- Item 5 covers initial fees; Item 6 covers ongoing fees. Both must fully disclose franchisee costs.
- Manual-related fees—initial manual, updates, replacements—must be disclosed if you charge them.
- Your operations manual may describe fee payment procedures; ensure it matches FDD disclosures.
FDD Items 5 and 6: The Franchise Disclosure Document sections that disclose all fees franchisees must pay—initial (Item 5) and ongoing (Item 6). Manual-related fees belong here if you charge them.
Fees are one of the first things prospective franchisees look at. Items 5 and 6 must be complete and accurate. That includes any fees tied to your operations manual—whether you charge for the initial manual, updates, or access.
What Items 5 and 6 Require
Item 5 covers fees paid to the franchisor (or affiliates) before or at opening. That typically includes:
- Initial franchise fee
- Training fees
- Technology or software setup
- Initial operations manual (if you charge for it)
Item 6 covers ongoing fees. That typically includes:
- Royalties
- Advertising fund contributions
- Technology or software subscriptions
- Manual update fees (if recurring)
- Replacement manual fees (if you charge)
If you don't charge for the manual or updates, you still disclose that—e.g., "Operations manual and updates provided at no additional cost." Clarity matters.
Manual-Related Fees: What to Disclose
Common manual-related fees and where they typically go:
| Fee Type | Typical Item | Notes | |----------|--------------|-------| | Initial operations manual | Item 5 | One-time, often bundled with training | | Manual updates (annual) | Item 6 | Recurring fee for revised manuals | | Replacement copies | Item 6 | Per-copy or per-request fee | | Digital platform access | Item 5 or 6 | Depends on one-time vs. subscription | | Binder/hardware for manual | Item 5 | If charged separately |
When in doubt, disclose. Undisclosed fees can create rescission rights and enforcement risk.
How the Manual and FDD Interact
Your operations manual may describe:
- When and how franchisees pay fees
- What's included in various fee tiers
- Procedures for requesting replacements or updates
That content must match the FDD. If the FDD says "manual updates are included in the royalty," the manual shouldn't describe a separate update fee. Inconsistency confuses franchisees and undermines your disclosures.
Practical Checklist
- Audit your fee structure: List every manual-related fee you charge.
- Verify FDD disclosure: Is each fee in Item 5 or 6, with amount and timing?
- Check the manual: Does it describe fees consistently with the FDD?
- Update both when fees change: Fee changes typically require an FDD amendment.
Documentation that supports your fee disclosures
FranchiseBuilder helps you maintain operations manuals that align with your FDD.
Get StartedFor more on the FDD, see what is an FDD and how your FDD and operations manual work together.
Frequently Asked Questions
- What do FDD Items 5 and 6 cover?
- Item 5 discloses fees the franchisee must pay to the franchisor before or at the time of opening—initial franchise fee, training fees, etc. Item 6 discloses ongoing fees—royalties, advertising, technology, and other recurring charges. Both must be complete and accurate.
- Do I need to disclose manual-related fees in the FDD?
- Yes. If you charge for the initial operations manual, updates, replacement copies, or access to a digital manual platform, those fees must be disclosed in Items 5 or 6. Omission can create disclosure liability.
- Where do manual fees go—Item 5 or Item 6?
- One-time fees (initial manual, one-time setup) typically go in Item 5. Recurring fees (annual update fees, platform subscriptions) go in Item 6. Your franchise attorney can confirm the correct placement for your fee structure.
- What if my manual describes different fees than my FDD?
- The FDD controls. If your manual says something different about fees, you have an inconsistency. Update the manual to match the FDD, or amend the FDD if the manual reflects the correct (and intended) fees. Never let the manual contradict the FDD.