# The additional-funds line

The word doing the work in that row is "additional." It is not "operating," not
"reserve," and not "working capital" in any sense a bank would recognise. The
figure is additional to the rows printed above it — the fee, the deposits, the
construction, the equipment, the inventory, the campaign — and it exists
because the disclosure format asks the franchisor to carry its estimate a
stated distance past opening day rather than stopping at the ribbon.

That makes the line the only row in Item 7 denominated in time as well as
money. Every other cell answers "how much." This one answers "how much, for how
long," and the two halves are equally load-bearing. A reader who copies the
dollars and drops the period has copied half a disclosure.

## Additional to the rows above it, not to the project

| Brand | Filing label | Period | Low | High | Share of high total |
| --- | --- | --- | ---: | ---: | ---: |
| German Doner Kebab | Additional Funds (Approx. 3 months) | 3 months | $15,000 | $20,000 | 2% |
| Shah's Halal Food | Additional Funds - 3 Months | 3 months | $10,000 | $30,000 | 7% |
| The Great Greek | Additional funds (for 0 - 6 months) | 0–6 months | $35,000 | $75,000 | 7% |
| Mad for Chicken | Operating Expenses / Additional Funds - 3 months | 3 months | $51,375 | $162,000 | 23% |
| 375° Chicken 'n Fries | Operating Expenses / Additional Funds - 3 months | 3 months | $30,000 | $60,000 | 12% |
| Döner Haus | Additional Funds – 3 months | 3 months | $20,000 | $35,000 | 6% |

The shares are each row's high against that brand's own printed high total,
which is the only comparison the arithmetic supports. German Doner Kebab's
2024 table devotes 2 percent of its high column to the line; Mad for Chicken's
2025 table devotes 23 percent to a row wearing the same three-month label. Both
figures are correct, and the gap between them is not a measure of prudence. It
is a measure of what each franchisor decided the row is additional to.

That is the first question to put to the row: additional to what, exactly.
German Doner Kebab's table already contains **Opening Inventory** of
$15,000–$20,000 and **Pre-Launch, Soft Launch and Grand Opening Marketing** of
$10,000–$15,000, so its additional-funds line does not have to carry either.
Mad for Chicken's table contains **Initial Inventory** of $14,250–$28,200 and a
fixed **Grand Opening Advertising** of $15,000, and its additional-funds high
is still more than eight times German Doner Kebab's. Two filings can define the same
label against different remainders. Adding a rival's inventory row into your own
additional-funds cell, or assuming the cell already contains replenishment,
produces a number no document issued.

## The stated period is a scope note

"Approx. 3 months" tells you how far the estimate reaches. It does not say the
restaurant will cover its own costs at the end of month three, and no filing
here claims it will. The [FTC compliance
guide](https://www.ftc.gov/system/files/documents/plain-language/bus70-franchise-rule-compliance-guide.pdf)
frames the initial period as the boundary of the disclosure, and a boundary is
not a forecast.

The Great Greek's 2023 label is the most honest about this and the most often
misread. It reads "for 0 - 6 months." The floor of that period is zero. A
buyer who reads $35,000–$75,000 as six months of funded operation has read the
upper bound of the period against the lower bound of nothing in particular; the
filing has disclosed a band of dollars over a band of months, and the two bands
are not locked together. Treating it as a six-month reserve because six is the
larger number in the label is the same category error as treating a midpoint as
a typical project, which the [what the range hides](/what-the-range-hides/)
chapter takes apart at the total level.

Comparison across periods fails for the same reason. Great Greek's high and Mad
for Chicken's high cannot be ranked, because one is a figure for up to six
months and the other is a figure for three. Annualising either invents a
run-rate the filing did not state. Keep the months in the cell.

## Not a reserve in the sense a lender means

A lender's working-capital test is a structure, not an amount. It typically
involves a defined measurement, a required balance or ratio, restrictions on
what the cash may be used for, a coverage test against debt service, and a
consequence if the test fails. An Item 7 additional-funds line has none of
those properties. It is an estimate in a disclosure document. Nobody is
required to hold it, nothing restricts its use, no covenant references it, and
no default follows from spending it early.

The practical consequences are worth stating plainly. The line is not
segregated, so it is spent by whatever arrives first — a change order, a delayed
inspection, an extra month of rent before the doors open. It is not tested, so
a project can consume it entirely during construction and still show a total
inside the filing's range. And it does not survive contact with a financing
structure: loan proceeds may fund eligible startup costs, but principal,
interest, fees, and required equity all move cash after opening, and none of
them is an Item 7 expenditure. The [what Item 7
excludes](/what-item-7-excludes/) chapter collects the rest of those omissions.

The lender's version of this number, if there is one, will be built from a
monthly model with a stated coverage cushion, and it will usually be larger
than the disclosure's figure and differently shaped. The
[working capital](/working-capital/) chapter is where that rebuild belongs.

## What a non-round figure is telling you

Both endpoints of five of the six reserves in the table are round to the
nearest five or ten thousand dollars. Mad for Chicken's 2025 row is the
exception: $51,375 to $162,000. A figure carried to the
nearest twenty-five dollars was almost certainly computed from an underlying
schedule of monthly costs rather than estimated at a round number, and that
schedule is the most useful document a buyer could ask for. It would name
the occupancy, labour, and cost-of-goods assumptions the row was built on and
allow the buyer's own model to be compared against the franchisor's, line by
line, instead of cell against cell.

The reverse inference is not available. A round figure is not evidence of
carelessness, and Shah's $10,000–$30,000 or German Doner Kebab's
$15,000–$20,000 may sit on schedules just as detailed. Precision in the printed
number is only a hint about where to aim the question.

## Questions that turn the cell into a schedule

1. What months does the period start from — lease execution, delivery of the
   premises, or the first day of trading?
2. Which of occupancy, payroll, cost of goods, royalties and funds, insurance,
   technology, marketing, repairs, and debt service are inside the estimate?
3. Does it assume the store is open for the whole period, or does it include
   any pre-opening weeks?
4. Does it include an owner draw, and if not, what is the household living on?
5. Does it assume replenishment of the [opening
   inventory](/opening-inventory/) row, or does that row cover the period?
6. Does it assume card settlement lands in the same month as the sale?
7. What happens to the estimate if opening slips by a month — is the reserve
   consumed by [rent](/rent/) and payroll before the first transaction?

Every one of those answers should end up on the [worksheet](/item-7-worksheet/)
beside the filing's figure, in the reason column rather than in place of the
disclosure. The filing's cell is evidence of what the franchisor estimated. It
is not the amount of cash a specific project, a specific lease, and a specific
opening date will need, and the two numbers being different is expected.

Read the row as the end of the franchisor's obligation to estimate, not as the
end of the buyer's need to fund. It is the last cell in the table because the
table stops there, and the restaurant does not.

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HTML: https://donerhandbook.com/the-additional-funds-line/