Equipment financing and leasing

Item 7 asks what a thing costs. It does not ask how the buyer intends to pay for it, and it does not adjust when the answer changes. That is why the equipment line in a filing looks the same whether the buyer reading it plans to write a cheque, draw on a loan, or sign a five-year lease with a specialist lessor — and why a buyer who assumes a lease will shrink the row has misread what the row is.

The disclosure that speaks to funding is Item 10, which is where a franchisor states whether it or an affiliate offers financing, on what terms, and with what guarantees required. It is a different item, answering a different question, and the two have to be read together. The FTC’s Franchise Rule compliance guide sets out that division: Item 7 is the initial investment, Item 10 is financing arrangements, and Item 8 is what must be bought from whom.

What the equipment rows are estimates of

Brand	Filing label	Low	High
German Doner Kebab	Restaurant Equipment; Furniture & Fixtures; Small Wares	$166,500	$210,000
Shah’s Halal Food	Fixture Package	$30,000	$50,000
Mad for Chicken	Furniture, Fixtures and Equipment	$85,000	$110,000
375° Chicken ‘n Fries	Furniture, Fixtures and Equipment	$100,000	$120,000
Döner Haus	Equipment; Furniture & Fixtures; Opening Smallwares	$91,000	$112,000

German Doner Kebab’s figure adds three rows the 2024 filing already separated, and Döner Haus’s adds three the 2026 filing separated. The Great Greek’s 2023 Restaurant Package of $225,964–$248,560 is absent from that table on purpose: it is grouped as a package here because the filing does not disclose an equipment share, and the restaurant package chapter keeps it whole. It matters for financing too, and not in the way a buyer might expect.

A leased line still appears in the table

Item 7 discloses the expenditure required to open, and a lease does not remove the expenditure so much as restructure it. An equipment lease commonly requires advance payments, a security deposit, documentation fees, freight, rigging, installation, commissioning and sales or use tax — and installation and freight are frequently outside the financed amount entirely, because a lessor finances an asset rather than the labour of connecting it. The equipment chapter makes the same point about purchase quotes: acquisition price is not installed cost.

So the row does not shrink because the funding changed. Whether a particular filing’s estimate assumes a purchase, a lease, or new versus used equipment is a footnote question, and the footnote is the only public evidence. A reader who finds no such note has found a silence, not a permission to discount the cell.

The technology rows show the pattern most clearly, because they are the ones already half subscription. German Doner Kebab discloses Hardware and Software at $27,500–$30,000, Shah’s a combined Computer Hardware, Software, and POS System at $4,000–$6,000, Mad for Chicken a POS System at $3,000–$15,000, Döner Haus a Computer, Software, and Point of Sale Systems row at $11,000–$15,000, and 375° splits POS System at $4,000–$6,000 from Computer Systems at $500–$1,500. Those cells are opening hardware and initial licensing. The recurring charge lives in Item 6 — Capriotti’s discloses a technology fee of 0.65 percent of gross sales and Dog Haus a technology development fee of $5,000 a year, both from a May 2024 comparative study of published FDDs. The technology chapter keeps the opening cell and the subscription apart, and a lease-versus-buy analysis has to do the same.

What a lease changes

Ownership, and everything that follows from it. A lessor holds title, which raises questions Item 7 has no row for: what the end-of-term options are, what the buyout costs, who is responsible for maintenance and for insuring the asset, what happens when a model is discontinued mid-term, and whether the franchisor’s approval of a substitution binds the lessor as well as the operator.

Two of those questions have teeth in a restaurant specifically. The first is attachment. Equipment bolted, ducted, or plumbed into premises can become a fixture in the landlord’s eyes, and a lease of the premises and a lease of the kitchen can make overlapping claims on the same stainless steel. That gets resolved in a landlord waiver, negotiated before installation rather than discovered at the end of the term.

The second is the personal guaranty. Equipment financing for a new single-unit operator is usually guaranteed personally, which stacks with the guaranty the landlord asks for when a tenant-improvement allowance is large and with whatever the franchise agreement requires. None of those obligations is an Item 7 amount, and together they are frequently the largest thing a buyer signs.

Restricted sources narrow the funding options

Item 8 is where required purchases are disclosed, and a required source changes a financing conversation as much as a price. A lessor underwrites identifiable collateral: named models, serial numbers, a resale market. A list of discrete appliances satisfies that easily. A franchisor-supplied bundle is harder, because the collateral is described by a category rather than a schedule.

Great Greek’s Restaurant Package at $225,964–$248,560 is the illustration. It is the largest non-construction line in that 2023 filing, it is priced in a narrow band, and it is a single line. Financing it means asking the franchisor for the schedule behind it — what assets, what values, what is equipment and what is consumable — which is the same request the other and unlabeled costs chapter recommends for a miscellaneous row, for the same reason. A number without a schedule is difficult to lend against and impossible to insure precisely.

Shah’s Fixture Package at $30,000–$50,000 raises the question at a smaller scale, and its separate Build-Out/Construction line at $80,000–$160,000 raises the mirror image: work performed as part of construction is not equipment collateral at all, whatever it cost and however permanent it feels.

Financing reshapes the calendar, not the total

This is the sentence worth keeping. A lease converts a large early payment into a stream of smaller later ones. The Item 7 total does not move, the opening cash requirement falls, and the monthly obligation rises for the whole term — including the months the additional-funds line was estimating, which did not necessarily assume a lease payment at all.

That trade has to be shown in two places at once. The SBA’s startup-cost worksheet separates one-time from monthly, and a leased kitchen moves a line across that boundary rather than deleting it. On the monthly side it becomes part of the working capital model, alongside the Item 6 stack and debt service. On the opening side it becomes the advance payments, the deposit, and whatever the lessor declined to finance.

Questions before signing either document

1. Read Item 10 in the delivered FDD for franchisor or affiliate financing, and for any guarantee it requires.
2. Read Item 8 for required suppliers before assuming an asset can be shopped or leased.
3. Ask whether the Item 7 estimate assumes new or used equipment, and whether it assumes purchase.
4. Get freight, rigging, installation, connection, commissioning and tax quoted separately, and ask the lessor which of them it will finance.
5. Get a schedule behind any franchisor-supplied package before treating it as collateral.
6. Negotiate a landlord waiver for anything attached to the premises.
7. Total every personal guaranty across the franchise agreement, the lease, and the equipment paper, and read them as one exposure.
8. Put the monthly obligation into the cash model for the full term, not for the disclosed initial period.

Item 7 gives the cost of the kitchen under the franchisor’s assumptions. Item 10 gives what the franchisor will do about paying for it. A lessor’s term sheet gives the rest, and none of the three is a substitute for the other two.