Item 19 of the FDD explains franchise financial performance. Learn what it includes, how to read averages vs medians, and why 35% of brands skip it.
Quick answer: Item 19 is the section of the Franchise Disclosure Document where the franchisor may disclose financial performance representations — average or median revenue, unit economics, or earnings projections. It is optional under FTC rules, but if a franchisor includes it, the data must have a reasonable basis. About 60-70% of franchisors disclose Item 19; the absence of Item 19 is itself a signal worth understanding.
Item 19 of the Franchise Disclosure Document is titled “Financial Performance Representations.” It is the section where a franchisor may — but is not required to — provide prospective franchisees with data about the financial performance of its franchise units. This includes information such as revenue, gross sales, costs of goods sold, operating expenses, or net profit.
Under the Federal Trade Commission’s Franchise Rule, Item 19 is the only place where a franchisor can legally make claims about financial performance. A franchise sales rep cannot tell you over the phone that “our average location does $1.2 million in revenue” unless that specific figure appears in Item 19. If someone from the franchisor makes earnings claims outside of the FDD, that is a violation of federal law — and a significant red flag.
This makes Item 19 both extraordinarily valuable and frustratingly limited. It is the single most important section of the FDD for evaluating whether a franchise can produce the financial return you need, yet franchisors control exactly what data they include and how they present it.
As of 2025-2026, approximately 60-65% of franchise systems include some form of financial performance data in Item 19. That percentage has been steadily increasing — it was closer to 40% a decade ago — as prospective franchisees have become more sophisticated and franchisors recognize that transparency is a competitive advantage.
The remaining 35-40% of franchisors provide an Item 19 that simply states: “We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets.”
Franchisors have wide latitude in what they disclose. Some provide minimal data; others offer detailed breakdowns. Common formats include:
The most basic Item 19 reports total revenue or gross sales figures. This is helpful but incomplete — revenue tells you nothing about profitability. A franchise with $1 million in revenue and $950,000 in expenses produces only $50,000 in owner income.
More transparent franchisors provide revenue data along with key expense categories:
| Category | Example Disclosure |
|---|---|
| Gross revenue | Average or median by unit |
| Cost of goods sold (COGS) | As % of revenue or dollar amount |
| Labor costs | Including wages, benefits, payroll taxes |
| Occupancy costs | Rent, CAM, utilities |
| Royalties and fees | Calculated at actual rates |
| Marketing/advertising | Required contributions + local spend |
| Other operating expenses | Insurance, supplies, technology |
| Owner’s discretionary earnings | Revenue minus all operating costs |
This format gives you a realistic picture of unit-level economics and allows you to model your own projected profitability.
Some franchisors report gross profit (revenue minus COGS) or operating profit (revenue minus all operating expenses before debt service and taxes). These are more useful than revenue alone but may still exclude significant costs like debt service on your initial investment.
Sophisticated Item 19 presentations segment data by:
Segmented data is far more useful than system-wide averages because it allows you to identify how units similar to your planned location actually perform.
This is the single most important distinction when reading Item 19. The average (mean) is pulled upward by high-performing outliers. If a franchise system has 100 units where 90 earn $500,000 in revenue and 10 earn $2,000,000, the average revenue is $650,000 — but 90% of franchisees earn below that average.
The median is the middle value: half of units perform above it and half below. The median gives you a more realistic expectation of what a typical unit produces.
When a franchisor reports only averages without medians, ask yourself why. It is almost always because the average looks more impressive than the median.
The most transparent Item 19 presentations divide units into quartiles:
Quartile data lets you see the full range of outcomes. You should plan your financial projections based on Q3 performance (lower-middle) rather than Q1 or even Q2. If the economics work even in Q3, you have a margin of safety. If the franchise only makes sense at Q1 performance levels, the risk is high.
Always check the fine print (which is often literally in footnotes) to understand:
Even the most detailed Item 19 typically omits several critical financial factors:
When a franchisor chooses not to include financial performance data in Item 19, the obvious question is: what are they hiding?
It depends on how you define failure. Some legitimate reasons for omitting Item 19 include:
However, in a market where 60-65% of franchisors do provide this data, choosing not to puts a brand at a competitive disadvantage for a reason. In many cases, the absence of Item 19 does indicate that the financial performance data would not be compelling enough to help sell franchises.
As a prospective franchisee, you should:
VetMyFranchise extracts and structures Item 19 data from thousands of FDDs, making it possible to:
Item 19 data should be a starting point for your financial modeling, not the final answer. Here is a practical approach:
Start with Q3 (lower-middle quartile) figures if available, or the median if not. Do not plan around averages or top-performer numbers.
Add missing costs. Layer in your projected debt service, an owner’s salary draw, capital reserve contributions, and any local cost adjustments.
Model a realistic ramp-up. Assume 50-60% of mature unit revenue in year one, 70-80% in year two, and full ramp-up by year three.
Stress-test with a downside scenario. What happens if your revenue is 20% below the Q3 figure? Can you still meet your debt obligations and living expenses?
Validate with franchisees. Share your projections with existing franchise owners during validation calls and ask whether your assumptions are realistic.
Have your franchise attorney review the Item 19 footnotes. The fine print often contains critical context about data methodology and exclusions that affect how the numbers should be interpreted.
Item 19 is not a guarantee or a promise. It is a data set that, when read carefully and supplemented with additional research, provides the foundation for an informed investment decision.
Item 19FDDfinancial performance representationsfranchise earningsfranchise disclosure documentunit economics
Item 19 is the section of the Franchise Disclosure Document titled "Financial Performance Representations." It is where a franchisor may voluntarily disclose data about the financial performance of its franchise units, such as revenue, expenses, or profit figures. Under FTC rules, it is the only place a franchisor can legally make earnings claims to prospective franchisees.
No. Item 19 is voluntary under the FTC Franchise Rule. Approximately 60-65% of franchise systems include some form of financial performance data in Item 19 as of 2025-2026. The remaining 35-40% simply state that they do not make financial performance representations. The percentage of brands including Item 19 has been steadily increasing over the past decade.
The absence of Item 19 is a cautionary signal but not automatically a dealbreaker. Some newer franchise systems may lack enough data to present meaningful figures, and some legal teams advise against disclosure to limit liability. However, in a market where the majority of franchisors do disclose this data, choosing not to often indicates the numbers would not be compelling. You should ask the franchisor why they omit it and rely more heavily on validation calls with existing franchisees for financial information.
Always prioritize the median over the average when both are available. Averages are skewed upward by high-performing outlier locations, making the "typical" unit appear more profitable than it actually is. The median represents the middle value where half of units perform above and half below, giving a more realistic expectation. If only averages are reported, assume the median is lower.
A franchise sales representative cannot legally make earnings claims or financial projections that are not included in Item 19 of the FDD. If a salesperson tells you specific revenue or profit figures that do not appear in Item 19, they are violating the FTC Franchise Rule. Document any such claims and consider it a serious red flag about the franchisor's compliance culture.
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