Library · Educational overview · Approx. 7 min read
Most people evaluating a franchise read Item 5, see one number, and think they have found the price. Item 5 is the entry fee. Item 6 is the bill that keeps arriving. It is a single table, usually two or three pages, and it is the most information-dense page in the entire disclosure document — if you know how to read the columns.
WHAT ITEM 6 ACTUALLY IS.
Under the FTC Franchise Rule, a franchisor must give a prospective franchisee a Franchise Disclosure Document (FDD) before any sale. The FDD has 23 numbered items in a required order. Item 6 is titled “Other Fees,” and it must disclose every recurring or occasional fee the franchisee pays to the franchisor or its affiliates — everything other than the initial fees already disclosed in Item 5.
It is presented as a table with four columns: Type of fee, Amount, Due date, and Remarks. That structure is not decorative. Each column answers a different question, and buyers routinely read the first two and skip the last two — which is exactly backwards, because the Remarks column is where the discretion is disclosed.
THE FEE TYPES YOU WILL USUALLY FIND.
Item 6 tables vary by system, but a familiar set of line items shows up again and again. Read each one for its base — what number the percentage is applied to — because that is where most buyers misjudge the weight of the fee.
- Royalty. The anchor line. Usually a percentage of gross sales or gross revenue, charged weekly or monthly. Note the word gross: a percentage royalty is charged on revenue, not on profit, so it is owed in months where the business does not make money.
- Advertising, brand, or marketing fund. Often an additional percentage of gross sales, pooled and spent by the franchisor. The Remarks column typically states whether the franchisor must spend it in your area — frequently, it does not.
- Local advertising minimum. A separate requirement to spend a set amount or percentage in your own market, on top of the fund contribution. Two lines, two obligations.
- Technology fee. Required software, point of sale, patient or customer management systems, and hosting. Usually a flat monthly amount, and usually subject to change on notice.
- Training fees. Initial training may sit in Item 5; Item 6 covers additional or replacement training, refresher courses, and training for new staff, often per person, plus travel and lodging at your cost.
- Transfer fee. Charged when you sell the business. Sometimes a flat amount, sometimes a percentage of the sale price, and usually paired with an approval right over your buyer.
- Renewal fee. Charged at the end of the term to continue operating, commonly alongside a requirement to sign the then-current agreement, which may carry different economics than the one you signed.
- Audit fee. Charged when an inspection finds an underreporting variance above a stated threshold, typically covering the franchisor's audit costs plus the shortfall and interest.
- Late fees and interest. A per-occurrence charge plus an annual interest rate on unpaid amounts.
- Insurance, indemnification, and non-compliance charges. Amounts the franchisor may charge if you fail to maintain required coverage or fail to correct a system violation after notice.
HOW TO READ THE FOUR COLUMNS.
AMOUNT.
Look for three things: the base (gross sales, net sales, collected revenue, or a flat amount), whether a minimum applies, and whether the number can change. A royalty stated as “6% of gross sales or $X per month, whichever is greater” behaves like a fixed obligation in slow months and a percentage in strong ones. That single phrase changes the risk profile of the entire deal.
DUE DATE.
Frequency and mechanism both matter. “Payable weekly by electronic funds transfer” means the franchisor draws from your account on a schedule you do not control. Compare that against your own collection cycle: if you are paid over a program's duration but the royalty is drawn against booked revenue immediately, your cash flow and your fee obligation are on different clocks.
REMARKS.
This is the column that rewards slow reading. Remarks is where you find phrases like “may be increased on 30 days' notice,” “payable to our affiliate,” “non-refundable,” “we are not obligated to spend any portion in your area,” and “uniformly imposed” or its absence. A fee that looks fixed in the Amount column may be adjustable in the Remarks column.
TYPE OF FEE.
Count the lines. A table with six lines and a table with nineteen lines describe very different relationships, even at identical royalty rates. The number of distinct ways money can move toward the franchisor is itself a disclosure.
HOW ITEM 6 CONNECTS TO THE REST.
Item 6 is not meant to be read alone. Four other items complete the picture.
- Item 5 — Initial Fees. The entry cost. Item 5 plus Item 6 is the full franchisor-facing cost picture: one-time in, recurring after.
- Item 7 — Estimated Initial Investment. A range covering everything needed to open and operate for an initial period, including third-party costs like build-out, equipment, and working capital. Item 7 often includes the first few months of Item 6 fees inside its working-capital line, so do not double count — and do check the footnotes, which carry the assumptions.
- Item 19 — Financial Performance Representations. Optional. A franchisor may present performance data, or may say nothing at all. If Item 19 is blank or minimal, no one at the company is permitted to give you performance numbers verbally — and if someone does anyway, that mismatch is itself a finding.
- Item 20 — Outlets and Franchisee Information. System counts, openings, closures, terminations, transfers, non-renewals, and contact lists for current and former franchisees. Read Item 6 next to Item 20's turnover tables: fee structure and exit rate are related facts, and the former franchisee list is the only place you can ask about both from the outside.
A practical way to hold it together: Item 5 is what it costs to start. Item 7 is what it costs to open. Item 6 is what it costs to keep going. Item 20 tells you how many people stopped.
DOING THE ARITHMETIC YOURSELF.
Item 6 gives you rates. It does not give you dollars, because dollars depend on a revenue number that only you can supply. If you want to size the recurring load, do it this way: take a revenue figure you choose as a planning assumption — not one anybody gave you — and apply every percentage line in the table to it, then add every flat line. That total is your annual franchisor-facing cost at that assumed revenue level, and it repeats every year the agreement runs.
Two disciplines make that exercise honest. First, label the input as your own assumption, and run it at more than one level, including a low one. Second, treat the result as cost structure only. It is not a forecast of what a business will earn, and no one — including us — can responsibly tell you that.
WHEN THERE IS NO FDD: A LICENSE IS NOT A FRANCHISE.
Atlas Metabolic is a license, not a franchise. There is no FDD, because the disclosure obligation attaches to franchise offers, and a license is a different legal structure: one license fee, a 0% ongoing royalty, and a business that operates under the partner's own brand with the partner owning the entity, the website, the patient list, and the equity, with the right to sell it.
That absence cuts both ways, and it deserves to be said plainly. A regulated FDD forces a standard set of disclosures whether the seller wants to make them or not. Without one, the disclosure burden shifts onto the buyer, and a licensor's transparency is voluntary. So use Item 6 as a checklist and demand the same information anyway.
Two more structural questions worth asking of any offer, franchise or license: does the seller's compensation depend on your ongoing revenue, and does the seller's approval control your exit? Those two answers define most of what a contract will feel like five years from now. Our own answers are on the Ownership page and in the full written agreement, which you see before any decision.
WHAT TO DO NEXT.
If you are comparing structures, read Franchise vs. License for the side-by-side on fees, brand ownership, control, and exit rights, then bring your questions to a real conversation. Start an application, or book a fit call and put the checklist above to us directly. You will get full written terms before any decision, and “not a fit” is a real possible answer in both directions.