Learn how to read and interpret Item 19 Financial Performance Representations in a Franchise Disclosure Document. Understand earnings claims before investing.
Item 19 of the Franchise Disclosure Document is where franchisors may (but are not required to) provide financial performance representations. This can include revenue figures, average unit volumes, cost data, or profitability metrics.
Critical fact: Only about 60% of franchise systems include substantive Item 19 data. The rest either provide a blank Item 19 or include a disclaimer stating they “do not make financial performance representations.”
There are a few reasons a franchisor might skip Item 19:
Our take: Well-performing franchise systems have every incentive to disclose. Absence of data is information in itself.
The most common format. The franchisor discloses average, median, or range of gross sales across the system. This tells you the top line but nothing about profitability.
What’s missing: Cost of goods, labor costs, rent, and all other operating expenses. Revenue alone doesn’t tell you if franchisees are profitable.
Better franchisors break down performance by quartiles (top 25%, second 25%, etc.) or by unit age. This helps you understand the distribution rather than just the average.
Look for: The median rather than the average. A few high-performing outliers can inflate the average by a wide margin.
The gold standard. Some franchisors provide a full profit-and-loss breakdown including revenue, COGS, labor, rent, and operating profit. This is rare but extremely valuable.
How many units are included? What percentage of the system do they represent? Some franchisors cherry-pick top-performing locations.
If 100 units have an average revenue of $1M, but the median is $700K, that means a few top performers are pulling up the average. You’re more likely to be a median performer.
Take the median revenue, subtract your estimated costs (use Item 7 and Item 6 data), and see what’s left. This is your realistic pre-tax income.
Item 20 gives you contact information for every franchisee in the system. Call at least 10-15 and ask about their actual financial performance.
If the franchisor doesn’t disclose financial performance:
About 3 in 10 FDDs in our database have no Item 19 at all. Whether that’s disqualifying depends on why it’s missing and what you can reconstruct from Items 5-7, 20, and 21 — our guide to franchises with no Item 19 walks through the decision framework.
Our database tracks which franchise systems include Item 19 data. Browse our franchise library — each listing shows whether Item 19 is available, along with investment ranges, fees, and system size.
Approximately 60% of franchise systems include substantive Item 19 financial performance representations in their FDD. The remaining 40% either leave Item 19 blank or include only a disclaimer stating they do not make financial performance representations.
Yes, franchisors have significant discretion in how they present Item 19 data. They can choose to show only certain tiers, regions, or unit types. Always check the footnotes to understand the sample size, what percentage of units are included, and whether any locations were excluded from the data.
Not necessarily, but the absence should prompt extra due diligence. Contact at least 10-15 existing franchisees from the Item 20 list and ask about their actual revenue and profitability. If no one is willing to share numbers, that itself is a warning sign.
The average (mean) can be inflated by a few high-performing outliers, while the median represents the middle unit in the system. As a new franchisee, you are statistically more likely to perform near the median. Always look for median figures when evaluating Item 19 data.
No. Most Item 19 disclosures show gross revenue or sales only. To estimate profit, you need to subtract cost of goods sold, labor, rent, royalties, advertising fees, and other operating expenses. Only a small number of franchisors provide full profit-and-loss data in Item 19.
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