Buyer Guide
FDD Item 17: Renewal, Termination & the Cost of Exit
Item 17 is the franchise exit clause: term length, renewal conditions, transfer fees, and non-competes. How to read it, with live term and transfer-fee data.
The data behind this guide
Item 17 of the FDD is the exit clause. It discloses how long your agreement lasts, whether you can renew, what it costs to sell or transfer the business, and the non-compete you are bound by if you leave. It is the most legally consequential item in the document, and the one buyers skip most often.
The franchise fee gets you in. Item 17 decides whether you can ever get out, and on what terms. A standard agreement runs 10 years, but the renewal conditions, transfer fees, and post-term non-compete vary enough to change the entire value of the investment.
The standard term: 10 years
Across the franchise brands in our database that disclose it, a 10-year initial term is by far the most common, followed by 5- and 20-year terms. The term matters because it sets the runway to recover your investment. A 5-year term on a build-out that takes three years to pay back leaves little margin, and renewal is not guaranteed.
| Brand | Initial Term | Renewal Term | Transfer Fee |
|---|---|---|---|
| Subway | 20 years | 20 years | $7,500 |
| Burger King | 20 years | 20 years | $2,000 |
| Domino's | 10 years | 10 years | $1,500 |
| The UPS Store | 10 years | 10 years | $7,500 |
Renewal is a right you have to earn
"Renewable" rarely means automatic. Most agreements condition renewal on the franchisee being in good standing, signing the then-current agreement (often with higher fees), renovating to current brand standards (a six-figure expense for many concepts), and paying a renewal fee. Read exactly what renewal requires, because the then-current agreement can carry materially worse economics than the one you signed.
The transfer fee: what it costs to sell
When you sell your franchise, the franchisor takes a transfer fee and must usually approve the buyer. Across brands that disclose it, transfer fees commonly run from a few thousand dollars to the low five figures, and they range widely. That fee, plus the franchisor's approval right over your buyer, directly affects how liquid your investment is. A brand that makes transfers expensive or difficult traps capital.
The non-compete: what you give up to leave
Nearly every franchise agreement includes a post-term non-compete, typically around two years, barring you from running a competing business within a defined radius after you exit. If you spend a decade learning an industry, the non-compete can stop you from using that experience the day you leave. Check the duration, the geographic scope, and how broadly "competing business" is defined.
How termination actually works
Item 17 also lists the grounds on which the franchisor can terminate you, and the notice period. The asymmetry is the point: franchisors can usually terminate for a list of defaults with a short cure period, while franchisees have very limited rights to terminate early. If you must exit before the term ends and cannot sell, you may owe lost future royalties. This is the clause most worth having a franchise attorney review.
How to use Item 17 in your research
- Match the term to your payback period. A short term on a slow-payback concept is a real risk.
- Read the renewal conditions, especially mandatory remodels and the "then-current" agreement.
- Price the exit: transfer fee plus the franchisor's approval right over your buyer.
- Have an attorney read the termination and non-compete clauses before you sign. This is where the 14-day window pays for itself.
Related franchise research
Part of our FDD item-by-item series. See the 23-item FDD checklist, Item 6 fees, and franchise exit strategy.
Take your franchise research further
- 📄 Download any brand's FDD summary — $5 per brand
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Frequently Asked Questions
- What is Item 17 in an FDD?
- Item 17 of the Franchise Disclosure Document covers renewal, termination, transfer, and dispute resolution. It discloses the length of the agreement, the conditions for renewal, what it costs to sell the business, the post-term non-compete, and the grounds on which the franchisor can terminate the franchisee.
- How long is a typical franchise agreement?
- A 10-year initial term is the most common across franchise brands, followed by 5-year and 20-year terms. The term sets your runway to recover the investment, and renewal at the end is usually conditional, not automatic.
- What is a franchise transfer fee?
- A transfer fee is what you pay the franchisor to sell your franchise to a new owner, who the franchisor must typically approve. Transfer fees commonly run from a few thousand dollars to the low five figures and vary widely, and they affect how easily you can exit the investment.
- Do franchises have non-competes?
- Yes. Nearly all franchise agreements include a post-term non-compete, typically around two years, that prevents you from operating a competing business within a defined area after you leave. Always check the duration, radius, and how 'competing business' is defined.