What Is Item 19 in a Franchise FDD? Financial Performance Explained

What Is Item 19?

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.

How Many Franchisors Include an Item 19?

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.”

Types of Data Presented in Item 19

Franchisors have wide latitude in what they disclose. Some provide minimal data; others offer detailed breakdowns. Common formats include:

Revenue or Gross Sales Data

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.

Revenue with Expense Breakdowns

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.

Gross Profit or Operating Profit

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.

Segmented Data

Sophisticated Item 19 presentations segment data by:

• Geography — Performance by region or market type
• Unit age — First-year units vs. mature units (critical because ramp-up periods dramatically affect numbers)
• Unit type — Inline vs. freestanding locations, different format sizes
• Time period — Quarterly or annual results

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.

How to Read Item 19: Critical Analysis

Averages vs. Medians

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.

Quartile Breakdowns

The most transparent Item 19 presentations divide units into quartiles:

• Top 25% (Q1) — The best performers
• Upper-middle 25% (Q2) — Above average
• Lower-middle 25% (Q3) — Below average
• Bottom 25% (Q4) — The weakest performers

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.

What Is the Basis?

Always check the fine print (which is often literally in footnotes) to understand:

• Which units are included? Some franchisors exclude units open less than 12 or 24 months, company-owned units, or “non-standard” locations. These exclusions can meaningfully skew the data.
• What time period does the data cover? The data should be from the most recent fiscal year. Older data may not reflect current market conditions.
• Are the figures audited? Some Item 19 data comes from franchisee-reported figures that have not been independently verified.

What Is Missing from Item 19?

Even the most detailed Item 19 typically omits several critical financial factors:

• Debt service — Your loan payments on the initial investment are not included in operating expense data. A franchise showing $120,000 in annual operating profit may leave you with $50,000 after debt service on a $500,000 SBA loan.
• Owner’s salary — Some Item 19 presentations include an owner/manager salary in expenses; others do not. Check whether the profit figure assumes the owner is working full-time without drawing a salary.
• Initial ramp-up losses — Item 19 data from mature units does not reflect the reality that most new franchises operate at a loss for 6 to 18 months before reaching profitability.
• Capital expenditure reserves — Equipment replacement, vehicle upgrades, and required remodels are not typically included in annual operating expense figures.
• Local market variation — System-wide data does not account for the specific economics of your market (local labor rates, rent, competition, demographics).

Brands Without Item 19: Is It a Red Flag?

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:

• Newer franchise systems with limited data history may not yet have statistically meaningful performance figures
• Highly variable business models where unit performance depends so heavily on local factors that system-wide data could be misleading
• Legal risk aversion — Some franchisors’ legal counsel advises against Item 19 to avoid potential misrepresentation claims

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:

1. Ask the franchisor directly why they do not include Item 19
2. Understand that without Item 19 data, you are heavily dependent on validation calls with existing franchisees for financial reality checks
3. Weight the absence of Item 19 as a negative factor (though not necessarily a dealbreaker) in your evaluation

How VetMyFranchise Analyzes Item 19 Data

VetMyFranchise extracts and structures Item 19 data from thousands of FDDs, making it possible to:

• Compare Item 19 data across competing brands in the same industry side by side
• Identify whether a brand reports averages, medians, or quartiles — and what that choice suggests about transparency
• Benchmark unit economics against industry standards for revenue, margins, and profitability
• Flag missing data points that a franchisor has chosen not to disclose
• Track year-over-year changes in Item 19 figures to identify brands with improving or declining unit economics

Using Item 19 for Your Financial Projections

Item 19 data should be a starting point for your financial modeling, not the final answer. Here is a practical approach:

1. Start with Q3 (lower-middle quartile) figures if available, or the median if not. Do not plan around averages or top-performer numbers.

2. Add missing costs. Layer in your projected debt service, an owner’s salary draw, capital reserve contributions, and any local cost adjustments.

3. 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.

4. 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?

5. Validate with franchisees. Share your projections with existing franchise owners during validation calls and ask whether your assumptions are realistic.

6. 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.