# Who pays for what

A utility deposit is money handed to a power company. It is not rent, the
landlord never touches it, and it comes back when the account closes. In German
Doner Kebab's 2024 filing it appears inside a row called **Lease, Utility &
Security Deposits**. Mad for Chicken and 375° Chicken 'n Fries each call their
version **Lease & Utilities deposits**. Great Greek's 2023 filing files the same
payment under **Utility Deposits/Licenses**, next to permits rather than next to
rent. Döner Haus's 2026 filing gives it a row of its own, **Utility Deposits**,
at a fixed $3,000. Shah's Halal Food names no utility deposit at all, disclosing
**Real Property** of $3,000–$10,000 and **Licenses, Permits** of $1,000–$3,000
and leaving the reader to work out where a meter deposit went.

One payment and one payee: bundled with lease deposits in three filings, bundled
with permits in a fourth, standing alone in a fifth, and unnamed in the sixth.
That is the whole problem of this chapter in a single row. Item 7
organises costs by the franchisor's sense of category, and a buyer needs them
organised by who receives the money and when.

## Three payees, and the column that names them

The disclosure format asks for more than an amount. It asks for the method of
payment, when the amount is due, and to whom it is paid. That fourth answer is
the one a compiled table of dollars cannot carry, and it is the one that turns a
cost schedule into a cash plan. Read it in the filing itself, as the
[how to read Item 7](/how-to-read-item-7/) sequence puts second, before any
comparison.

Broadly, the money goes three places. To the franchisor or an affiliate: the
initial franchise fee, any required package, and services the franchisor
performs. To the landlord: security deposits, prepaid rent, and any tenant
obligation the lease converts into a landlord charge. To third parties: general
contractors, architects, equipment vendors, sign fabricators, insurers,
utilities, municipalities, and advertising suppliers.

Only the first of those is fixed by the franchise agreement. Every itemised
filing here states the fee as an amount rather than a range — $30,000 at German
Doner Kebab and Shah's, $35,000 at Mad for Chicken and Döner Haus, $40,000 at
375° — except Great Greek, whose $35,550–$39,500 band is two classes of buyer
rather than two prices. The [franchise fee](/franchise-fee/) chapter covers that.
Everything
else in the table is a prediction about somebody the franchisor does not
control.

## The rows that name an intermediary

Two filings disclose a real-estate intermediary and three do not. German Doner
Kebab's 2024 table carries a **Property Agent** line at $0–$0. Great Greek's
2023 table carries a **Real Estate Service Charge** at $0–$3,500. The first is a
disclosed zero at both ends; the second is a range whose floor happens to be
nothing, which the [low column and high column](/low-column-and-high-column/)
chapter treats as a different kind of statement.

Both rows are worth a question about who is being paid and by whom. A tenant
representative is often compensated out of the landlord's commission rather than
by the tenant, which would explain a zero — and a fee that lands on the tenant
in a particular market would explain the other row. Neither filing says. Shah's,
Mad for Chicken and 375° have no such row, so a buyer working with a broker in
those systems needs the arrangement in writing rather than inferred from a
table.

## The same physical work, filed differently

A commercial hood is the standard example. Hung by a general contractor it looks
like construction; shipped with a kitchen package it looks like equipment;
supplied by the franchisor with the rest of the kit it looks like a package. The
filings reflect all three habits. German Doner Kebab discloses **Fit Out
Materials & Installation** of $175,000–$205,000 in the construction group beside
**Restaurant Equipment** of $140,000–$175,000. Shah's puts a **Fixture Package**
of $30,000–$50,000 beside **Build-Out/Construction** of $80,000–$160,000 without
saying which line holds a hood, a sink, or a walk-in box. Great Greek's
**Restaurant Package** of $225,964–$248,560 is a bundle the filing does not open.

Design work splits the same way. German Doner Kebab files **Architects and
Project Manager Fees** of $30,000–$50,000 in construction and keeps
**Professional Fees** of $10,000–$15,000 separately. Mad for Chicken and 375°
file **Architectural Plans** in construction and **Professional Fees**
separately. Great Greek files a **Design and Project Management Fee** of
$10,000 in construction and has no professional-fee row. Shah's has neither an
architecture row nor a project-management row, only **Legal & Accounting** at
$3,000–$6,000. The [professional fees](/professional-fees/) chapter reads that
pattern row by row.

Launch spending is the third case. Five filings disclose a named campaign —
German Doner Kebab's **Pre-Launch, Soft Launch and Grand Opening Marketing** at
$10,000–$15,000, Shah's **Grand Opening Campaign** at $1,000–$5,000, Mad for
Chicken's fixed **Grand Opening Advertising** at $15,000, 375°'s fixed $10,000,
and Döner Haus's $5,000–$10,000. Great Greek's grand opening is inside the
restaurant package. The same activity therefore sits in a marketing bucket in
five filings and in a package in the sixth, which is exactly why the
[grand opening](/grand-opening/) chapter refuses to compare the cells directly.

## Why the boundary moves at all

The bucket follows the buyer, not the work. When the franchisor or its affiliate
supplies something, it becomes a package or a fee, priced tightly because the
franchisor sets the price — Great Greek's package spans $225,964 to $248,560, a
narrow band beside leasehold improvements of $250,000–$650,000. When a general
contractor installs something, it becomes construction, priced widely because
the site decides. When the operator buys it directly, it becomes equipment,
signage, or technology.

That is a supply-chain fact wearing accounting clothes, and it has one useful
consequence: the label tells you something real about who you will be
negotiating with. A cost inside a franchisor package is not shoppable. A cost
inside a construction row is bid. A cost inside a deposit row is governed by a
lease. Item 8 is where required sources are disclosed, and reading it against
Item 7 converts a category into a counterparty.

## Landlord work is not a cost line

The largest single transfer in a restaurant buildout may not appear in Item 7 at
all. If a landlord delivers a shaft, a restroom core, a grease line and
conditioned air, that work is worth money and shows up as an absence — a low
construction figure, or German Doner Kebab's **Leasehold Improvements** low of
$0. If the landlord instead writes a cheque, that is a tenant-improvement
allowance and a cash-timing question rather than a discount. If the landlord
offers free rent, that funds occupancy and not the contractor.

Three different arrangements, all describable as "the landlord is contributing,"
and only one of them reduces the construction cash a tenant must find before
opening. The [tenant-improvement allowance](/tenant-improvement-allowance/)
chapter separates them, and [second-generation versus shell](/second-generation-vs-shell/)
tests what is physically present before any of it is priced.

## Who pays first

Sequence matters more than category once the money starts moving. The franchise
fee is typically due at signing, before a site exists. Lease and utility
deposits are due at execution. Equipment deposits are due at order, which can
be months before delivery — German Doner Kebab's restaurant-equipment high of
$175,000 and Great Greek's package of up to $248,560 are both early cheques
larger than their respective deposit rows. Contractor draws follow inspected
work, less retainage. Insurance is due before a landlord will release keys.
Training travel is due before opening week. Any landlord reimbursement arrives
last, after lien waivers and proof of payment.

An Item 7 total says nothing about that order, which is why a project can stay
inside a disclosed range and still run out of cash halfway through.

## Sorting the table by payee

1. Copy the "to whom paid" and "when due" columns from the filing beside every
   amount.
2. Group the rows into franchisor and affiliate, landlord, and third party.
3. Mark each third-party row as bid, quoted, or fixed by a public fee schedule.
4. Check Item 8 for every row you assumed was shoppable.
5. Write the landlord's contribution as work performed, money contributed, and
   rent forgone — three lines, not one.
6. Order the whole list by payment date and read the running cash requirement,
   not the total.
7. Carry the result onto the [worksheet](/item-7-worksheet/) and into
   [from Item 7 to a site budget](/from-item-7-to-a-site-budget/).

The categories in Item 7 are the franchisor's. The payees are the buyer's
problem, and they do not line up. A row that moves between buckets across
filings has not changed what it buys; it has changed who is expected to buy it,
which is the more useful fact of the two.

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