# Reading a multi-unit Item 7

Two filings here put a development-agreement total in Item 7 next to a
single-restaurant total, and both invite the same arithmetic. The development
figure is larger, it has a number of outlets in its heading, and dividing one
by the other looks like the obvious way to find out what a store costs inside
a programme. It is not. In both documents the division produces a per-unit
figure below the same table's own single-unit low, which is the signal that
the premise was wrong rather than that the franchisor has offered a discount.

What these tables actually price is entry into the agreement plus the *first*
outlet. Everything the agreement obliges a developer to build afterwards is
funded when it is built, at whatever it then costs, and no row in Item 7
describes it. That is not a gap in the disclosure. Item 7 is an
initial-investment disclosure for the outlet being opened, and the [FTC's
Franchise Rule compliance
guide](https://www.ftc.gov/system/files/documents/plain-language/bus70-franchise-rule-compliance-guide.pdf)
frames it that way; a development schedule is a contractual obligation
disclosed elsewhere in the document.

## Mad for Chicken's development table

The FDD issued 12 March 2025 contains three Item 7 tables. Two are
restaurants: a single Express Model at $243,500–$470,700 on 750–2,000 square
feet, and a single Full Restaurant at $321,125–$691,700 on 2,000–4,000. The
third is headed Multi-Unit Development Agreement and runs $263,500–$711,700.

| Item 7 table, FDD issued 12 March 2025 | Range | Low to high |
| --- | ---: | ---: |
| Single Express Model, 750–2,000 sq ft | $243,500–$470,700 | 1.93 |
| Single Full Restaurant, 2,000–4,000 sq ft | $321,125–$691,700 | 2.15 |
| Multi-Unit Development Agreement, first outlet | $263,500–$711,700 | 2.70 |

The footnote to that third table is the whole of the reading. It states that
the developer "will develop the minimum of three (3) Mad for Chicken
outlets", that the $55,000 development fee rises for each additional outlet
committed to, and that the low end of the range assumes the first outlet is
an Express Model while the high end assumes it is a Full Restaurant.

Read against that footnote, the shape of the range stops being mysterious. It
does not sit above the other two tables, it straddles them: the low of
$263,500 is $20,000 above the Express Model's low, and the high of $711,700
is $20,000 above the Full Restaurant's high. The $20,000 at each end is the
difference between the $35,000 initial franchise fee a single-unit buyer pays
and the $55,000 development fee, and Item 5 of the same filing credits
$10,000 against the initial fee for each outlet developed. The table is the
cheaper format at one end, the dearer format at the other, and one fee
substitution at both — and that is also why it has the widest band of the
three at 2.70 times low to high. The width is not evidence of a riskier
build. It is two different restaurants in one row.

Now the error. Divide $263,500–$711,700 by the three-outlet minimum and it
gives **$87,833–$237,233 an outlet**. The top of that is $6,267 below the
*bottom* of the Express Model range in the same document, which is the
cheapest restaurant the franchisor offers. No reading of the filing supports
a per-outlet cost that another table in the same Item 7 contradicts.

## Doner Shack's is the matched pair

The FDD issued 29 April 2025, seven weeks after Mad for Chicken's, does the
same thing with different numbers. Item 7 gives $498,000–$1,007,000 for a
single restaurant on premises of 1,200 to 1,800 square feet, and
$578,000–$1,087,000 for a three-restaurant development agreement — exactly
$80,000 more at both ends of the range.

Divided by three, $578,000–$1,087,000 is **$192,667–$362,333 an outlet**, and
$362,333 is $135,667 below the single-restaurant low of $498,000. Same shape
of mistake, same direction, same magnitude of wrongness.

The $80,000 increment is the giveaway, and it is worth stating why rather
than guessing what it consists of. Two additional restaurants cannot cost
$80,000 between them when the filing's own estimate for one is at least
$498,000. A development range that exceeds the single-unit range by a fixed
amount at both ends is describing one restaurant and a fee, not three
restaurants. What the $80,000 is composed of is not established by the
difference and should not be reverse-engineered from it.

| Filing | Single restaurant | Development agreement | Increment | Development ÷ outlet minimum |
| --- | ---: | ---: | ---: | ---: |
| Mad for Chicken, 12 March 2025 | $243,500–$470,700 Express; $321,125–$691,700 Full | $263,500–$711,700, three-outlet minimum | $20,000 at each end | $87,833–$237,233 |
| Doner Shack, 29 April 2025 | $498,000–$1,007,000 | $578,000–$1,087,000, three restaurants | $80,000 at each end | $192,667–$362,333 |

Both quotients are below their own filing's cheapest single-restaurant low.
That is the test, and it takes one subtraction: if the development range
divided by the outlet count comes out beneath the single-unit range in the
same document, the development range is not a per-unit figure.

## The same mistake upside down

German Doner Kebab's filing of 3 September 2024 shows the mirror image, and
it is the more expensive error of the two because it runs the other way. Its
Item 7 range of $690,500–$1,123,000 is stated per outlet on 1,200–1,400
square feet, and the document defines who is buying: "'You' means a person
who buys the right to operate 5 or more GDK Outlets from us."

So the printed range is one restaurant inside a commitment of at least five,
and the adjustment for the commitment runs upward from it rather than
downward. Five times the printed range is $3,452,500–$5,615,000. That
multiplication is an illustration of scale and not a schedule: the filing
does not say the five open together, the later ones will be built at their
own future costs rather than at 2024's, and the disclosed single-outlet Item
19 revenue in that document describes one unit of such a commitment rather
than the commitment. A reader who takes $690,500 as the price of entering the
GDK system has understated it by a factor near five; a reader who takes
$578,000 as the price of three Doner Shack restaurants has understated that
by a factor near three. Neither is an arithmetic slip. Both come from reading
the total without the sentence above it.

## Building a programme figure honestly

A development commitment can be costed, but only as a floor with the missing
pieces named. Take each filing's own single-unit estimate for the outlets
after the first, add it to the disclosed development range, and label the
result as what it is.

For Doner Shack, $578,000 for the agreement and the first restaurant plus two
more at the single-restaurant estimate is **$1,574,000 at the low end and
$3,101,000 at the high**, against a printed development range of
$578,000–$1,087,000. For Mad for Chicken, three Express Models comes to
**$750,500** and three Full Restaurants to **$2,095,100**, using $263,500 or
$711,700 for the first and the single-format table for the second and third.

Four things are missing from every one of those figures, and a budget that
does not carry them is not conservative:

1. **Cost movement over the schedule.** Outlets two and three are built in
   later years, and the [what changes between two
   filings](/what-changes-between-two-filings/) chapter is about how little a
   franchisor's estimate typically moves — which is a statement about the
   estimate, not about construction pricing.
2. **The fee treatment of the later outlets.** Mad for Chicken's footnote
   says the development fee rises for each additional outlet committed to and
   Item 5 credits $10,000 an outlet against the initial fee, and neither the
   escalation nor the arithmetic of applying the credits to outlets two and
   three is quantified in the document. The floors above use the single-unit
   tables, which include a $35,000 initial fee, and that is a substitution
   rather than a disclosure.
3. **Concurrency.** Two buildouts in the same quarter need two sets of
   working capital at once, and the additional-funds row in each table is
   sized for one restaurant. [The additional funds
   line](/the-additional-funds-line/) is why that row will not stretch.
4. **The schedule itself.** A development agreement carries opening
   deadlines, and a deadline is a cost when it forces a site, a contractor or
   a lease that would otherwise have been refused. [Change orders and
   overruns](/change-orders-and-overruns/) is the row-level version of that
   pressure.

## Whose estimate it is, over how long

A single-unit buyer is relying on the franchisor through one buildout. A
developer with a three- or five-outlet obligation is relying on it through
several, over years, for site approval, design, the specified vendors and the
opening crews. That makes the franchisor's own Item 21 a live question for a
multi-unit reader in a way it is not for someone opening one store and
reading one table.

The figures belong in one place rather than scattered through the cost
chapters, and they are in [the franchisor behind the
estimate](/the-franchisor-behind-the-estimate/), which covers every brand
here on the same terms — including Döner Haus, whose two audited periods are
both losses and whose members' equity fell over them, and which is not the
strongest record on that page. The point of putting them together is that a
commitment is a bet on the counterparty's continuity, and Item 7 is silent
about the counterparty.

## The checks, in order

1. Read the heading of every Item 7 table in the document before reading any
   number. Count how many are single outlets and how many are development or
   minimum-commitment totals.
2. Find the outlet minimum, in the table's footnote or in Item 5, and find
   the development fee separately from the initial franchise fee.
3. Read the footnote for what the low and high columns assume. A range whose
   two ends assume two different store formats is not a range for one
   project.
4. Divide the development total by the outlet count once, as a test and not
   as a result. If the quotient falls below the single-unit low in the same
   document, stop treating it as per-unit.
5. Build the programme floor from the single-unit tables, and write the four
   missing pieces above underneath it.
6. Check which direction the commitment runs. A per-outlet range inside a
   five-outlet minimum is multiplied, not divided.
7. Take the whole thing to [from Item 7 to a site
   budget](/from-item-7-to-a-site-budget/) one restaurant at a time. The first
   store is the only one any of these tables costs.

A development-agreement Item 7 is a well-formed disclosure that answers a
narrower question than its heading suggests. It says what it costs to sign
and open once. The obligation it attaches to is disclosed elsewhere in the
document, and the money for it is not in the table at all.

One thing the league table at the end of this chapter demonstrates by
omission. It collects the franchise-fee row from every filing this index has
itemised, and every one of those rows is a single-unit initial fee. Mad for
Chicken's $55,000 development fee is not there, because the line-item
worksheet here is its Full Restaurant table; Doner Shack is not there at all,
because no line-item schedule for it is on these pages. A development fee is
an Item 5 and Item 7 figure that a single-unit worksheet will never show you,
which is reason enough to read the headings before the rows.

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