The FDD section showing tables of franchised and company-owned outlets — opened, transferred, terminated, ceased operations — by state for the past three years, plus contact information for current and recently-terminated franchisees.
Item 20 forces transparency on system health. The required tables show, by state and by year for the trailing three years: how many franchise units opened, how many transferred between owners, how many were terminated, how many ceased operations, and how many are currently operating.
These tables are brutal for new franchisors with limited operating history — the numbers are simply small. There's nothing to do about it except accept that your first 5-10 sales are harder because Item 20 doesn't yet tell a strong narrative.
The franchisee contact information section is equally consequential. Item 20 requires you to list the names, addresses, and phone numbers of every current franchisee — and franchisees who left in the past year. Prospective candidates routinely call former franchisees during validation, and unhappy departures are the strongest single predictor of failed sales conversations downstream.
The strategic implication: treat franchisee retention as a sales tool. Every franchisee who fails or exits poorly damages your Item 20 numbers and gives the next prospect a reason to walk.
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 callA 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.
A federally required legal document that a franchisor must give to every prospective franchisee at least 14 calendar days before signing — disclosing 23 specific items about the franchise system, fees, and obligations.