What is the FDD Red Flag Quiz?

The Red Flag Quiz is a free 10-question assessment that evaluates your franchise deal for common warning signs. It takes 3 minutes and produces an instant risk score with specific items to investigate further.

How do I know if my franchise has red flags?

Common franchise red flags include uncapped technology fees, minimum royalty floors regardless of revenue, vague territory protections with digital channel carve-outs, high unit closure rates in Item 20, and limited Item 19 financial performance data. The quiz checks for all of these.

Is the Red Flag Quiz free?

Yes. The Red Flag Quiz is completely free with no account, no credit card, and no email required to see your results.

How risky is your franchise deal?

10 questions. 3 minutes. Find out if your deal has hidden red flags before you invest.

Question 1 of 10

Does the FDD include Item 19 financial performance data?

Item 19 is optional. Many franchisors skip it entirely.

Yes, with revenue AND expense/profit data

Yes, but only gross revenue (no expenses)

No Item 19 data at all

I don't know / haven't checked

Question 2 of 10

Are technology or marketing fees capped at a maximum amount?

Look in Item 6 for language like "subject to change" or "at franchisor's discretion."

Yes, there's a stated maximum

No cap, but increases require notice

No cap and franchisor has sole discretion

I don't know / haven't checked

Question 3 of 10

How many franchise locations have closed, been terminated, or transferred in the last 3 years?

Check Item 20 tables. Add up closures + terminations + transfers, then compare to total units.

Less than 10% of total units

10-20% of total units

More than 20% of total units

I don't know / haven't calculated

Question 4 of 10

Does your territory have genuine exclusivity?

Check Item 12 for carve-outs: online sales, mobile units, alternative channels, or "national accounts."

Full exclusivity with no exceptions

Exclusive with some carve-outs (online, national accounts)

No exclusive territory at all

I don't know / haven't checked

Question 5 of 10

Are you required to use specific vendors with no alternatives allowed?

Item 8 discloses required suppliers. Check if the franchisor or affiliates receive revenue from these vendors.

I can choose my own vendors for most things

Some required vendors, but I can use alternatives for others

All major vendors are mandatory, no alternatives

I don't know / haven't checked

Question 6 of 10

How many lawsuits or arbitration cases are disclosed in Item 3?

Focus on franchisee-initiated suits alleging fraud, misrepresentation, or failure to provide support.

None or routine matters only

1-3 franchisee lawsuits

4+ franchisee lawsuits or a pattern of similar claims

I don't know / haven't checked

Question 7 of 10

How long has the franchise system been operating?

Check Item 1. Newer systems may still be refining their model.

10+ years with 100+ locations

5-10 years or 50-100 locations

2-5 years or fewer than 50 locations

Under 2 years or fewer than 20 locations

Question 8 of 10

What happens if the franchisor terminates your agreement?

Check Item 17 for non-compete scope, cure periods, and what triggers termination.

Clear cure periods, reasonable non-compete (1 year, small radius)

Some cure periods but broad non-compete (2+ years, wide radius)

Immediate termination for subjective reasons, broad non-compete

I don't know / haven't checked

Question 9 of 10

How does your total investment compare to your available capital?

Use the FDD Item 7 HIGH-end estimate plus 20-30% for a realistic number.

Investment is less than 50% of my liquid capital

Investment is 50-75% of my liquid capital

Investment is 75-100% of my liquid capital

I need financing to cover the investment

Question 10 of 10

Have you spoken with at least 5 current franchisees (not from the franchisor's reference list)?

Item 20 lists all franchisees. Pick randomly - don't rely on the franchisor's hand-picked references.

Yes, 5+ randomly selected franchisees

I've spoken with 2-4 franchisees

Only franchisees the franchisor recommended

I haven't spoken with any franchisees yet

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Disclaimer: This tool is for educational and informational purposes only. It does not constitute legal, financial, or investment advice. Results are estimates based on the inputs you provide and general industry data. Always consult with a qualified franchise attorney and certified public accountant before making any franchise investment decision. Franchise-Grade Systems is not a law firm, accounting firm, or registered investment advisor.