What Is Item 22
Item 22 of the Franchise Disclosure Document is a compilation section that lists every contract, agreement, and exhibit you'll be required to sign as a franchisee. This includes the franchise agreement itself, territorial addendums, non-compete clauses, confidentiality agreements, equipment leases, and any ancillary service agreements with the franchisor or affiliated companies. The FTC requires that all documents referenced in Items 1 through 21 be attached as exhibits, making Item 22 your complete roadmap to legal obligations.
This section is critical because it transforms vague language elsewhere in the FDD into concrete, binding documents. If the franchisor mentions in Item 6 that you'll pay a 6% royalty, Item 22 will show you the exact payment schedule and calculation methodology in the actual franchise agreement exhibit.
Critical Documents to Review in Item 22
- Franchise Agreement: The primary legal contract governing your relationship with the franchisor, including renewal terms (typically 5-10 years), territory rights, termination conditions, and franchisor obligations for training and support.
- Development or Area Franchise Agreement: If you're signing a multi-unit deal, this specifies build-out schedules, performance requirements, and expansion timelines across your territory.
- Lease Addendum: Franchisor approval rights over your location, lease term alignment with franchise term, and landlord subordination agreements.
- Non-Compete and Confidentiality Agreements: Restrictions on operating competing businesses during and after your franchise term, typically 2-5 years post-termination depending on state law.
- Affiliate Agreements: Contracts for mandatory purchases from franchisor-owned suppliers or related entities. Cross-reference these with Item 8 (affiliated companies) and Item 19 (financial performance representations) to calculate true cost of goods sold.
- Technology or POS System Agreements: Payment terms for required software, data ownership, and transition procedures if your franchise ends.
How to Use Item 22 Effectively
Item 22 requires a systematic approach. First, verify that every agreement mentioned throughout the FDD is actually attached as an exhibit. Franchisors sometimes reference agreements in Items 4 (franchise fees), 6 (other fees), or 7 (initial investment) without including them in Item 22, which is a red flag for incomplete disclosure.
Second, cross-reference Item 22 documents against Item 19 (financial performance representations). If Item 19 shows average unit volumes of $500,000 for established locations, but the franchise agreement includes automatic termination triggers for units performing below $400,000, you need to understand that margin clearly.
Third, pay attention to renewal terms and territory modifications. Many franchise agreements allow the franchisor to reduce your exclusive territory at renewal or impose new conditions. These powers should be visible in the Item 22 exhibits.
Common Questions
- Can the franchisor change the terms in Item 22 after I sign? The documents in Item 22 are binding contracts. However, franchisors often require amendments as conditions of renewal. Review your franchise agreement for amendment procedures and renewal renegotiation language in Item 22.
- What if Item 22 is incomplete or exhibits are missing? This violates FTC Rule 16 CFR 436. Request the missing documents in writing and preserve that request as evidence. Franchisors must provide all referenced documents at least 14 calendar days before you sign or pay any fees.
- Should I negotiate the Item 22 documents? Franchisor agreements are typically non-negotiable for single-unit franchises, but multi-unit operators frequently negotiate territory size, development schedules, and renewal terms. Have an attorney propose modifications in writing during the 14-day review period.
Red Flags in Item 22
- Termination provisions that allow franchisor termination for vague reasons like "failure to maintain brand standards" without specific metrics.
- Non-compete clauses extending beyond 3 years post-termination or covering geographic areas larger than your original territory.
- Automatic territory reduction clauses or performance clawback provisions that aren't disclosed in Item 12 (territory).
- Mandatory affiliate purchases where pricing is not disclosed in the franchise agreement exhibit or Item 8.
- Missing exhibits or references to documents not attached, particularly operating manuals or training requirements mentioned in Item 11.
Related Concepts
- Franchise Agreement - The core legal contract template attached as an exhibit to Item 22.
- FDD - The complete disclosure document of which Item 22 is a required component.