The ITEM 19 and Franchise Business – Deal or No Deal?

When you are researching franchise business 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.

Additionally, Item 19 is not a good source to compare one franchise business to another. Comparing franchise opportunities based on their Item 19 information 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 franchise businesses. 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…”

Fit Tip: Whether you are looking at high or low cost franchise opportunities, Item 19 is just part of the whole picture. If your goal is to find the most profitable franchise for you to own, there are many other sources of data to investigate in order to have a better understanding of a brand’s financial landscape.

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.

Fit Tip: Talk to existing franchise owners (and not just the ones the brand recommends) to get a better picture of what a day in the life really looks like. The key to success is not just finding the most profitable franchises to own, but also finding the best FIT for you.

3. Expense Data = Absent.

Even when revenue is disclosed, net income is rarely shown. Item 19 often leaves out critical costs of a franchise business (think rent, labor, marketing, or debt service), which directly impact what you take home. High revenues don’t equal high profits.

And don’t forget – what one owner might expense is wildly different from how another owner manages write-offs and compensation. 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… the most profitable franchises to own 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.

Fit Tip: When you are looking at a franchise business, how well others have done monetarily is at the bottom of the list of reasons to choose a certain model. You need to pick a franchise that will let your strengths shine, aligns with your expectations around day-to-day life and flexibility, and more.

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? Go ahead… Pull your napkin out and see how many customers you need to break even monthly. Can you do it PLUS some?  

As for the validation stage, 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 franchise business… And you may not run it 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 today to get started with your 100% free Franchise Fit consultation. We will help you kick off your journey to pinpointing your perfect fit – whether that is a home renovation franchise, a pet franchise, a fitness franchise, or something else altogether.

FAQs About Franchise Business Opportunities and the Item 19

What is an Item 19 in franchising?

In franchise businesses, “Item 19” refers to a specific section of the FDD (Franchise Disclosure Document). This section covers Financial Performance Representations, or FPRs. Things that could be shared in an Item 19 include earnings information, expense data, revenue, and more. Franchisors are not required to include an Item 19 section in their FDD, but many do, as it helps to sell both high-end and low cost franchise opportunities.

What is the best franchise to own?

The best franchise to own is actually a MYTH. There is no one best franchise – rather, the “best” or most profitable franchises to own are the ones that capitalize on your strengths and skills. If you hate the day-to-day management of a certain franchise, you will not succeed as an owner.

What is the most profitable franchise to own?

The most profitable franchise to own depends on finding the right FIT. When you pinpoint a franchise that lets your strengths shine and plays into your skill set, that is where you will be most successful.

What is the cheapest franchise to buy?

There are many low cost franchise opportunities available in markets like Winston-Salem, Raleigh, Jacksonville, Chattanooga, and many other areas. We can discuss finding a territory and a brand with an affordable entry point into franchising that fits your ideal franchise business profile and everyday needs.

There are affordable businesses in areas like home renovation franchises, pet franchises, fitness franchises, gym franchises, wellness franchises, electrical franchises, plumbing franchises, and many other niches that may not have even crossed your mind!

How much does it cost to buy a franchise?

The cost of buying a franchise varies greatly – and remember, buying a franchise is not just about the initial Franchise Fee. Other startup costs include marketing, hiring, buildouts or renovations, and much more. Typically, the FDD will give you an idea of the costs you will need to account for in the first year or so of getting your franchise off the ground until you break even.

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Are you ready to kick off your next chapter as a franchise business owner?

Schedule a free meeting right here. I can’t wait to chat with you and discuss franchise opportunities, building your business, and starting a new chapter in your career. Working with me is always 100% free, 100% of the time. Talk to you soon!