The ITEM 19 – Deal or No, Deal?

When you’re researching franchise opportunities, one of the most anticipated sections of the Franchise Disclosure Document (FDD) is Item 19: Financial Performance Representations (FPRs). This is where franchisors may (but are not required to) share historical revenue, expense, or profit data from their franchise system.  

On the surface, it feels like the holy grail of decision-making—finally, some numbers. But here’s the reality: relying solely on Item 19 to decide whether to buy a franchise is a mistake. This document is the epitome of comparing Apples and Oranges!

Sit down for this one…here is why:

1. Not All Franchisors Provide the Same Information (Not Kidding!)

Franchisors are not required to include Item 19 but they do because it helps sell licenses. Some provide detailed financials, while others give partial or limited data (e.g., gross revenue averages without expenses). You might be looking at a “best-case scenario” instead of a complete financial picture.  “It’s like a box of chocolates…”

2. Averages Tell You What?  Not much.

Many Item 19 disclosures are based on averages, which can be misleading. An “average” can be skewed by a handful of top-performing franchisees, while the majority may be operating below that number. Without context, the average can set unrealistic expectations.

3. Expense Data – Absent.

Even when revenue is disclosed, net income is rarely shown. Item 19 often leaves out critical costs—rent, labor, marketing, or debt service—which directly impact what you take home. High revenues don’t equal high profits. Oh but wait, what one owner expenses is wildly different from another owner.  We are over here expensing home improvements and another person is expensing their new Audi.  See my blog featuring Net Income – that is another story for another day.

4. The numbers are HISTORY!

The numbers in the Item 19 are historical data points. They are not futuristic. They are not current year-to-date. They do not represent the current market landscape. The numbers are completely a reflection of the previous year’s performance by owners that were operating a full calendar year prior to updating the FDD (yearly occurrence).

5. Performance Depends on You – And that is a FACT!

Yes, I mean to tell you that just because this is a franchise, it does not mean you automatically make money! Sorry. Your results won’t just depend on the franchise brand, it will depend on the location, market size, your management style, and your ability to execute the model too. Item 19 can’t tell you how well you will perform—it only shows what others have done under different circumstances.

6. There is Gold in Validation

Numbers are important, but the real insights come from conversations with existing franchise owners. They’ll tell you what margins look like, what unexpected expenses come up, and how long it took them to cover expenses monthly, operate in the “black” or hit break-even. Validation calls reveal the day-to-day realities that Item 19 cannot capture. In essence, we can break it down to simple math:  how much does it cost to run the business monthly (without bells and whistles) and how much does the average ticket bring in…pull your napkin out and see how many customers you need to breakeven monthly.  Can you do it PLUS some?  

As for Validation, we can talk later about how to manage validation calls and pull out the data to use in how YOU will operate.  Remember, you are going to run the business and it may not be exactly like them. Can you get excited about the typical day-in-the-life?

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FIT TIP:  Item 19 is a useful tool, but it’s only one piece of the puzzle. Don’t let it be the deciding factor. Pair it with thorough validation, market research, and an honest evaluation of your goals and resources – Find Your Fit and that will show you the money!

Ready to Find Your Fit?  Contact Us