1851

For prospective franchisees researching the brand of their dreams, the <a href="https://1851franchise.com/what-is-an-fdd-2705192">Franchise Disclosure Document (FDD)</a> is a key component in the decision-making process and <a href="https://1851franchise.com/evaluating-potential-earnings-item-19-qa-2703118">Item 19</a> is perhaps the most influential piece of that puzzle. Item 19 answers the all-important question for investors: How much money can I make?But beware, some franchisors may make generous earnings projections based on a small sample size in a single market, while others may not make projections at all. Here’s how to make sense of this critical information.&nbsp;<h4>What Is Item 19?</h4><a href="https://1851franchise.com/the-franchise-bible-item-19-2703090">Item 19</a> is the section of the FDD known as the “Earnings Claim” or “Financial Performance Representations.” It’s the section that addresses return on investment, so for many investors, it represents the bottom line.&nbsp;For franchisors, this section is tricky. While not mandatory to even include, Item 19 showcases just how profitable a franchise owner can expect to be. And because there’s no standard for how this section should read or what it should look like, the information listed <a href="https://1851franchise.com/the-franchise-bible-item-19-2703090">can vary from brand to brand</a>.&nbsp;<h4>To Include or Not To Include?</h4>Brands that do choose to include finances in Item 19 offer prospective franchisees a certain level of transparency other brands might not.But just because a brand chooses not to include financial information in this section doesn’t necessarily mean it’s untrustworthy; there are a number of reasons this could be the case. Perhaps the brand is a newer franchise without enough data to confidently project into the future, or maybe it just doesn’t think its numbers would translate to other markets.“If you can’t stand behind your numbers, then you shouldn’t put them in, but it’s not necessarily a red flag just because they’re not there,” said <a href="https://www.msaworldwide.com/about-us/team-slides/kay-ainsley?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-to-make-sense-of-item-19-in-an-fdd-2714788" target="_blank" rel="nofollow">Kay Ainsley</a>, managing director of <a href="http://www.msaworldwide.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-to-make-sense-of-item-19-in-an-fdd-2714788" target="_blank" rel="nofollow">MSA Worldwide</a>, a franchise advisory group. “The franchisor may be just starting to franchise. Or, they may only have locations in one market and don’t want to mislead people. It may not be that the numbers are bad. It could be just the opposite. It may be that they’re really strong in that one market and the franchisor doesn’t want to set unrealistic expectations.”<h4>What To Look For</h4>Remember that no two Item 19s look alike, so comparing a few won’t necessarily make one brand more appealing than another. What you should look for is the bottom line: a breakdown of top-line revenue, profitability and profit and loss data per location. This information can help you understand what you can expect your business to earn if all goes according to plan.From there, continue to vet that data. Is the statement including numbers from every location, or are some data points missing? Has the franchisor cherry-picked a couple of corporate-owned locations to show off or are you really getting a representative sample?&nbsp;“Is the data an average of all locations? If so, are they all in New York City or in South Dakota? Are they in markets that are similar to the one you’d like to open a franchise in? These are important questions to ask when reading through Item 19. Franchisors aren’t trying to mislead people, but the data can be confusing. Because of that, prospective franchisees need to know what to look for,” said Ainsley.Some brands are proud of their financials and eager to offer potential partners their projections, while others are a little more protective. But just as they are, you should be protective of your finances and make a decision that makes you feel safe and comfortable with who you’re investing your money in.

How To Make Sense of Item 19 in an FDD

1851 Franchise

Of all the items in a Franchise Disclosure Document, Item 19 is an outlier. Here's how to judge how much money you'll make with a franchise. 

how-to-make-sense-of-item-19-in-an-fdd

Sola Salons

Photo of outside of a Sola Salons location

With Decades of History and Opportunities for Consolidation, Sola Salons System Is Ripe for Private Equity Investments

sola-salons-private-equity-investment-opportunities

Woodhouse Spas

Your Path To Owning a Woodhouse Spa: A Step-By-Step Guide to Franchise Ownership

woodhouse-spas-franchise-ownership-steps

Right at Home

Right at Home Expanding In-Home Care Services in State College

right-at-home-expanding-in-home-care-services-in-state-college

BoConcept

Photo of three dark gray chairs surrounding wooden table with vining plant

Facility Executive: BoConcept Shares How Office Design is Evolving in 2025

2025-office-design-trends-engaging-workspaces

HomeTeam Inspection Service

Photo of HomeTeam Inspection Service franchisees Tyler and Doug Butler

How a Chance Encounter Led This Father-Son Duo to a Thriving Home Inspection Business

doug-tyler-butler-hometeam-franchise-success-story

Buying a Franchise Masterclass

 Franchise Opportunities

Get Support Buying a Franchise

How to Buy a Franchise White Paper

How to Buy a Franchise

How to Sell Franchises

How to Grow a Franchise

Find a Franchise Supplier

1851 Franchise Opportunities

Franchisor News

Franchisor Power Rankings

FranCamp Mastermind Summit

Franchise Resources

What ALEC-Laffer's Report Means for Franchising

Website Awards

Power Rankings

About 1851

Advertise on 1851

Contact 1851 Editorial

Terms of Use

1851 Login

GROWTH CLUB LOGIN

facebook

instagram

twitter

linkedin

youtube

Fly Dance Fitness Expands With First Franchise Location in Georgia

fly-dance-fitness-franchise-expansion

&pizza - Fast-Casual Pizza Chain Begins Franchising - 1851 Franchise

&pizza Embraces Franchising To Fuel Bold New Growth Strategy

andpizza-franchising-ceo-mike-burns

CFOs See Recession as Likely in ’25; Why Now Is the Time To Water the Franchise Buyer Seeds

cfos-see-recession-as-likely-in-25-why-now-is-the-time-to-water-the-franchise-buyer-seeds

Ellie Mental Health Franchisee Backlash - Alleged Misrepresentations - 1851 Franchise

Ellie Mental Health Faces Franchisee Backlash Over Alleged Misrepresentations

ellie-mental-health-franchisee-backlash

Tariff Tensions Threaten U.S. Restaurants with Rising Costs and Supply Chain Disruptions

tariff-tensions-threaten-us-restaurants-with-rising-costs-and-supply-chain-disruptions

Paris Baguette Ranks Among Top Franchises on Entrepreneur’s Franchise 500® for 2025 - 1851 Franchise

Paris Baguette Ranks Among Top Franchises on Entrepreneur’s Franchise 500® for 2025

paris-baguette-ranks-among-top-franchises-on-entrepreneurs-franchise-500-for-2025

Photo of a basket of chicken wings with dipping sauce and celery

RestaurantNews: Franchisees File Comprehensive Legal Complaint Against Hurricane AMT

restaurantnews-franchisees-file-comprehensive-legal-complaint-against-hurricane-amt

1851 Agg - McDonald's Sales Decline Expansion Continues - 1851 Franchise

McDonald’s Franchisees Feel the Pressure as Sales Decline and Expansion Continues

mcdonalds-franchisees-feel-the-pressure-as-sales-decline-and-expansion-continues

Design with hundred dollar bill and orange "recession" banner across the middle

ABC News: Recession Risks Are Rising, Economists Say. Here’s What to Know.

recession-risks-impact-economy-franchise-world

Florida Franchisee Reflects on Success and Growth with Sylvan Learning

florida-franchisee-reflects-on-success-and-growth-with-sylvan-learning

The Top Quick Service Restaurant Franchises for 2025

the-top-quick-service-restaurant-franchises

Top 25 Emerging Restaurant Franchises - 1851 Franchise

Top 25 Emerging Restaurant Concepts to Consider in 2025

top-emerging-restaurant-concepts-to-consider

Franchise Deep Dive: Studio Pilates Franchise Costs, Fees, Profit and Data

franchise-deep-dive-studio-pilates-franchise-costs-fees-profit-and-data

Franchisee spotlight featuring Ian and Dick Rydholm with gradient blue background and Sylvan logo

Ian and Dick Rydholm Celebrate 30 Years of Transforming Lives Through Sylvan Learning in El Paso, Texas

ian-and-dick-rydholm-celebrate-30-years-of-transforming-lives-through-sylvan

How To Make Sense of Item 19 in an FDD

MORE STORIES LIKE THIS