FDD Item 20 Explained: Franchise Outlet Data — How to Read Unit Growth, Transfers, and Closures

Across 160 brands in the FranchiseVS database with growth rate data, 102 are growing their unit count, 54 are shrinking, and 4 are approximately flat. The average system size across all 163 brands with unit data is 1339 locations. Understanding what the Item 20 tables say about a specific system requires reading several metrics together — not just the headline unit count.

The Item 20 Tables: What Each Column Means

Item 20 presents data in a standardized table format with consistent column labels. For franchised outlets:

• Outlets at start of year: The baseline count. Combined with end-of-year count, this gives you net unit change for the year.
• Openings: New franchise locations that opened during the year. High opening counts are positive, but only relative to the closure/termination counts — openings without closures are genuine growth; openings that match or are exceeded by closures indicate a "leaky bucket."
• Terminations: Franchise agreements terminated by the franchisor before their natural expiration. High termination rates (more than 1-2% of total units per year) indicate the franchisor is actively ending underperforming relationships. This is not automatically bad — a franchisor that enforces standards and terminates genuinely non-compliant operators maintains brand quality. It becomes concerning when termination rates are high AND litigation rates in Item 3 are also high — suggesting disputed rather than consensual terminations.
• Non-renewals: Agreements that expired and were not renewed. This can be the franchisee's choice (the franchise wasn't profitable enough to justify renewing), the franchisor's choice (the unit or the franchisee didn't meet renewal standards), or a mutual decision. High non-renewal rates in mature systems with 10-year-old agreements indicate systemic dissatisfaction.
• Reacquired by franchisor: The franchisor purchased the franchisee's location and converted it to company ownership. Occasional reacquisitions are normal. A sustained pattern of reacquisitions indicates the franchisor is buying back locations — possibly because they see company operation as more profitable than franchising those units, or because they're stabilizing a troubled system by bringing locations back in-house.
• Ceased operations (closures): Locations that closed without any transfer or reacquisition. This is the clearest signal of franchisee difficulty — the location simply stopped operating. Normalize this count against total units per year to calculate the voluntary closure rate.
• Transfers: Existing franchise agreements assigned from one franchisee to another (resales). A healthy transfer market is a positive signal — it means there is buyer demand for existing franchise locations, which validates the business model and supports the idea that you can eventually sell your franchise for value. Low transfer counts relative to system size may indicate difficulty finding buyers for existing locations.

Growth Rates From Our Database

Fastest-growing brands (50+ units, recent net growth rate):

Brands with negative unit growth (50+ units):

State-by-State Outlet Tables: Your Most Useful Data

Many buyers overlook the most granular part of Item 20: the state-by-state table listing every current franchisee by state, with name and contact information. This table is gold for validation calls. The FDD is required to provide contact information for every franchisee operating or who has left the system in the past fiscal year. You can call these franchisees directly — they are not required to speak with you, but many will, especially if you approach them as a peer considering the same investment rather than as an adversary.

When calling current franchisees from the Item 20 list, ask:

• How has your revenue compared to what Item 19 suggested it would be?
• How responsive is the franchisor's support team when you have operational issues?
• If you could do it again, would you choose this franchise?
• Are you planning to renew when your agreement expires?

Call former franchisees from the "transferred" and "closed" columns too. Former franchisees who left the system voluntarily are not bound by non-disparagement agreements and will often tell you things current franchisees won't — what the real reasons were for their exit, what they wish they'd known, and whether the franchise performed as represented.

Turnover Clustering Reveals Problems the FDD Won't State Directly

Item 20 lists every outlet that was terminated, not renewed, transferred, or ceased operations during the prior fiscal year. The raw numbers matter, but the geographic and temporal clustering matters more. If 8 out of 12 closures in a system happened in the same state or region, that signals a territory-specific problem — a bad area representative, a market that doesn't support the model, or a vendor/supply chain gap in that geography. If closures spiked from 3 to 15 in a single year while openings stayed flat, that's a systemic issue the franchisor may explain as "market conditions" but often reflects a policy change (fee increase, technology mandate, territory adjustment) that made marginal units unviable. Cross-reference the closure list with the transfer list: when the same outlet appears as "transferred" rather than "closed," the franchisor often facilitated a fire-sale transfer to avoid counting it as a closure in Item 20's net-growth math. A system showing 5 closures and 20 transfers may have more distress than one showing 15 closures and 5 transfers — transfers mask the exit when the franchisor brokers the deal.

Multi-Unit Owner Concentration Is a Hidden Risk Signal

Count the unique names in Item 20's franchisee list versus the total outlet count. In some systems, 60–70% of units are owned by 10–15% of franchisees — large multi-unit operators who signed area development agreements. This concentration creates two risks that single-unit buyers overlook. First, multi-unit operators get preferential territory assignments, vendor pricing, and franchisor support because they represent more royalty revenue. A single-unit owner in a system dominated by 50+ unit operators will receive structurally less attention. Second, if a major multi-unit operator exits — financial distress, partnership dissolution, estate sale — the system can lose 30–80 units simultaneously, which damages brand perception, supply chain economics, and the franchisor's own financial stability. Check Item 21 too: if the franchisor itself operates a large percentage of units (company-owned), the dynamic shifts again — the franchisor is competing with its own franchisees for customers and may prioritize company-owned locations for the best territories and marketing support.