Franchisors: Should you market your Item 19?

Ask any franchise development professional what the first question out of a prospect’s mouth is, and you’ll likely get some variation on this answer: “How much money can I make?”

It’s for this reason that a franchise’s Item 19 becomes a powerful marketing tool in the hunt for franchisees.

“If you have a compelling Item 19, then use that tool,” said Sean Fitzgerald, chief development strategist at No Limit Agency*. “That is the best form of getting people engaged, and doing it on your website is the best place to do it.”

In fact, according to Fitzgerald, a brand’s Item 19 should be among the first things people see when visiting their development website.

“Ideally, when someone lands on a development site, the Item 19 should be there as a teaser to engage more,” he continued. “Or make it part of your FAQs section. If you have strong numbers, they should be at the top of the list.”

While highlighting potential profit for franchisees is a sure way to grab their attention, it’s just as vital for franchises to do so in accordance with the law. Item 19s are powerful tools, but they can also lead to major trouble if used incorrectly.

Charles Internicola, business and franchise lawyer at Internicola Law* Firm, agreed that Item 19s will inevitably play a role in franchise marketing, especially in cases where franchise brokers are part of the equation. However, there are hazards to be wary of.

“The biggest hazard or risk that franchisors face is making ‘additional or supplemental’ financial performance representations that are not disclosed in their Item 19,” he said. “Consider that what does and does not constitute a disclosable financial performance representation is quite broad and can include oral statements, projections and estimates. If a franchisor is not careful and lets their marketing team run loose with promoting financial metrics in advertisements, they could unintentionally trigger a disclosure violation.”

As Internicola pointed out, staying in step with full disclosure regulations is difficult in brief marketing pieces, which is why it’s important for brands to figure out when and where it makes the most sense to put their Item 19 on a pedestal. As Fitzgerald highlighted, franchise development websites present the ideal opportunity.

While brands might experiment with different approaches, there are really only two key factors to keep in mind: Item 19s should be utilized to their fullest potential as a marketing tool and they should be used in a way that won’t come back to bite the brand.

With franchise marketing that puts Item 19s front and center becoming more the norm than the exception, it’s important for brands to make sure they don’t fall behind.