Franchise Item 19 Explained

What Item 19 Is Legally

Item 19 is the 19th of 23 required disclosures in every Franchise Disclosure Document (FDD). Its official name is "Financial Performance Representations" (FPR). It's the only section of the FDD where a franchisor is legally permitted to share data about how much money franchisees make.

The critical detail: Item 19 is entirely voluntary. The FTC's Franchise Rule requires franchisors to include all 23 items in the FDD — but it does not require franchisors to include financial performance data in Item 19. A franchisor can simply state "We do not make any financial performance representations" and comply with the law. The result: buyers of non-disclosing franchises are committing six- or seven-figure investments without any audited earnings data.

When a franchisor does include Item 19 data, that data must be based on actual franchise performance, not projections. It must specify the time period covered, the number of outlets included, and whether the data represents all outlets or a subset. The data is audited or verified as part of the FDD filing — it's the most legally defensible financial information in the entire document.

Disclosure Rates: Who Reports and Who Doesn't

In our database of 171 franchise brands, 149 (87%) include some form of Item 19 financial data. But disclosure rates vary dramatically by category:

The pattern is not random. Categories with standardized, measurable operations (Home Services, Fitness) disclose at 90%+. Categories where operators are more autonomous or where business volume is harder to standardize (Hospitality, Real Estate) disclose far less. Business Services hits 100% in our database — all 4 brands disclose — because B2B services franchises tend to attract more financially sophisticated buyers who demand the data before signing.

The lowest-disclosure categories are where buying blind is most dangerous: Hospitality at 25% means 3 of 4 hotel franchise brands ask you to invest $1M+ without telling you what the median franchisee earns.

How to Read Item 19: Four Critical Distinctions

1. Gross Revenue ≠ Profit

Item 19 almost always discloses gross revenue — the total money coming in before any expenses are paid. A fitness studio reporting $984K average revenue sounds exceptional until you subtract rent ($80K–$150K), instructor payroll ($350K–$450K), royalties ($79K at 8%), marketing ($50K), and supplies. Net operating income at $984K gross might be $150K–$250K. That's the number that matters for your return on a $385K investment — and Item 19 rarely shows it.

Some Item 19 disclosures include P&L data — net income or EBITDA. Those disclosures are significantly more valuable than revenue-only data. When evaluating an FDD, check whether the Item 19 goes beyond revenue. If it does, that's a more trustworthy franchisor signal: they're showing you the full picture, not just the flattering top line.

2. Use Median, Not Average

Averages in franchise Item 19 data are distorted by outliers. A system of 50 locations where 45 generate $300K and 5 generate $1.5M reports an "average revenue" of $420K — which accurately describes none of the actual locations. The median ($300K) is what the typical franchisee experiences.

When an FDD reports only "average" (mean) without median, ask the franchisors's representative for median data directly. They have it. Some FDDs provide quartile breakdowns — 25th, median, and 75th percentile. A quartile breakdown is the most useful single table in any Item 19 disclosure because it shows the distribution: how does the top quarter perform vs. the bottom quarter? The gap between those numbers is your risk range.

3. Survivor Bias: Only Open Locations Are Reported

Item 19 data typically covers "all franchisee-operated outlets that were open and operating during [fiscal year]." Locations that closed during the year are excluded. This creates systematic survivor bias: the average revenue figure excludes the franchisees who failed — the very outcomes that would most inform a prospective buyer.

A system that opened 20 locations 3 years ago and has 14 still operating reports Item 19 data from 14 survivors, not from all 20. The 6 that closed presumably had below-average revenues. Including those would lower the reported average — but the FDD legally isn't required to include them. This is not fraud; it's legal disclosure structure. But it means the "average revenue" figure is an upper bound on what a typical new franchisee can expect, not a central estimate.

The correction: Item 20 shows unit count changes over 3 years. If a system opened 40 and closed 28, the Item 19 average revenue reflects the 12 survivors — a highly selected sample. High closure rates in Item 20 should cause you to apply a meaningful discount to the Item 19 numbers.

4. Red Flags in Item 19 Disclosures

• Small sample size (<50 units reported): With fewer than 50 locations in the data, a handful of outlier performers can move the average significantly. Small sample Item 19 data is directionally useful but not statistically reliable.
• Top-quartile reporting only: Some franchisors disclose performance only for their "top-performing" or "most successful" locations. This is legal but misleading — it shows the ceiling, not the floor or the median. A disclosure that reads "Our top 25% of locations averaged $X" tells you what's possible, not what's typical.
• "Systemwide Average" without breakdowns: A single average figure for the entire system masks geographic variation, operator experience differences, and market size differences. A Minuteman Press in suburban Dallas and one in rural Iowa are different businesses — one system-wide average obscures both.
• Revenue net of commissions or refunds: Some service businesses report "net revenue" (after refunds, discounts, or agent commissions) while others report gross. If the methodology isn't specified, it's impossible to compare numbers across brands.

What the Disclosed Revenue Numbers Actually Look Like

For context, here are the top Item 19 average revenue disclosures in our 171-brand database, sorted by disclosed average annual revenue:

Revenue/Investment ratio = average annual revenue divided by minimum investment. Higher is better — it measures how quickly the disclosed revenue could theoretically recover the capital invested. Note: this ratio uses gross revenue, not net income. A 4x ratio doesn't mean 4x return — it means 4x gross revenue on minimum investment, before expenses.

When Item 19 Is Missing: What to Ask Instead

These 6 large franchise brands in our database — all with 200+ units — do not disclose Item 19:

For brands that don't disclose, these are the alternative data sources, in order of reliability:

The Bottom Line on Item 19

Item 19 is the most important section in the FDD for anyone making a financially-grounded investment decision — and the most misread. The correct approach:

• Use median, not average. Ask for quartile data if the FDD doesn't provide it.
• Convert gross revenue to net operating income using actual expense data from franchisee calls. A $900K revenue franchise paying $200K rent + $500K labor + $60K royalties + $40K marketing is a $100K net income business.
• Apply a survivor bias discount when Item 20 shows high closure rates — the disclosed average excludes the closed locations.
• For non-disclosing brands, validate through franchisee P&Ls from Item 20 contacts — this is more work but often produces better data than a system-average FPR.
• The absence of Item 19 in a mature, large-unit-count franchise is itself a decision input. The franchisor has the data. Choosing not to share it is a signal worth weighing.