The only optional disclosure in the FDD — Item 19 is where franchisors can disclose actual financial performance data (revenue, gross profit, EBITDA) for franchised or company-owned units, supported by a reasonable basis and substantiated records.
Item 19 is the single biggest sales conversion lever in the FDD. It's also the only optional item — a franchisor can choose to make no Financial Performance Representation at all.
But there's a trap. If you skip Item 19, you cannot legally make any earnings claim — anywhere. Sales calls, brochures, websites, Discovery Day, recorded webinars. Saying "our top units do over $1.2M" once outside Item 19 creates federal liability and gives the franchisee grounds to rescind. Most franchise systems that skip Item 19 effectively put their sales team under a federal gag order.
A strong Item 19 includes quartile or decile data (not just averages), specifies the cohort and time period, discloses material assumptions, and shows enough cost stack that candidates can model their own outcome. Even one or two company-owned units, properly disclosed, beats no Item 19.
The standard isn't a minimum unit count — it's a "reasonable basis" requirement. Industry data and our experience consistently show that franchise systems with strong Item 19s close at meaningfully higher rates than systems without one.
“A franchise without Item 19 is a franchise that's chosen to be harder to sell. Sometimes that choice makes sense. Most of the time, it doesn't.”— Jason Stowe, Founder
Thirty minutes with a franchise SME who's built systems for 30 years. We'll look at your specific situation and tell you what's realistic — without the pitch.
Book a 30-min strategy callThe FDD section that discloses the franchisee's total estimated cost to open and operate a unit for the first three months — presented as a low-to-high range across roughly 12 specific cost categories.
The financial performance of a single franchise unit — revenue, gross margin, operating expenses, and EBITDA — at typical operating volume. Strong unit economics are the precondition for a sustainable franchise system.
A profitability metric calculated as revenue minus cost of goods sold and operating expenses (before interest, taxes, depreciation, and amortization). In franchising, unit-level EBITDA determines royalty room and franchise viability.
A direct conversation between a prospective franchisee and one or more existing franchisees in the system — typically arranged by the franchisor — where the prospect asks candid questions about the franchisor relationship, unit economics, and operating reality.