1851

When exploring a franchise opportunity, the two most important source documents to consider are the Franchise Disclosure Document (FDD) and franchise agreement. Reviewing these documents, in addition to interviewing current and former franchisees in the system, are best practices to follow when doing an evaluation of the brand. Item 20 in the FDD can tell you much about the franchisor and its performance. Unfortunately, this Item doesn&#8217;t usually receive the scrutiny it deserves. There are five tables in an Item 20 and each one represents specific information. Make sure you are well-educated on each of the tables and their purpose. Table 1: This table presents the number of franchised and company-owned outlets and the net change over a three-year period. It also shows the number of outlets at the start of each year and the end of each year, along with the net change for each year. Check out the trends over the years, such as the increase in number of company-owned locations as opposed to franchisee-owned. Also look at how quickly the brand is growing year after year. Table 2: Table 2 shows the number of transfers from franchisees by state for a three-year period. More established brands can show an increase in transfers when existing franchisees want to get out and exit the system. High transfer rates are not always a negative sign but could be a potential red flag to explore. Table 3: The third table shows you the number of outlets at the start of each year for a three-year period, as well as the number opened, non-renewed, reacquired by franchisor, terminated and ceasing operations for other reasons. It then tells you the number of outlets at the end of the year. This table can show you negative trends. For instance, a large number of terminations and ceased operations can signal a bad franchise program. When franchise terminations and ceased operations exceed 5 percent of total franchisee locations, a red flag has been planted. Table 4: Again, over a three-year period, the status of company-owned outlets is shown. Has there been a large increase in company-owned outlets? If so, the brand could be experiencing a decline in their franchise program. A decrease in company-owned outlets usually signifies the franchisor reselling company-owned locations. Table 5: This table can be confusing. The table represents the &#8220;projected&#8221; new franchise outlets for the latest year. The projection of new franchise and company-owned outlets is broken down by state. In many cases, franchisors might project new outlets without significant research. The most important entry in this table is Franchise Agreements Signed but not Opened (SBNO). If the number is huge here you might have a franchisor more focused on selling new franchises than helping to grow and develop the system that already exists.

1851 Franchise

When buying into a franchise, be sure to review this necessary section. 

This brand page has been paid for by 1851. Content within this page that is paid will showcase a Sponsored icon. This means the brand has engaged 1851 FRANCHISE to write the content. Content without the Sponsored Icon is aggregated media placements the brand earned. Questions can be sent to editorial@1851franchise.com

How to review item 20 

how-to-review-item-20

BooXkeeping

From Ice Cream to Income Streams: How Greg Cox Found His Sweet Spot with BooXkeeping

from-ice-cream-to-income-streams-how-greg-cox-found-his-sweet-spot-with-booxkeeping

Children's Lighthouse

Children’s Lighthouse Named Among America’s Best in Customer Service by Newsweek

childrens-lighthouse-named-among-americas-best-in-customer-service-by-newsweek

KLA Schools

How KLA Schools Is Redefining Early Childhood Education Through a Hands-On, Academically-Rich Approach

how-kla-schools-is-redefining-early-childhood-education-through-a-hands-on-academically-rich-approach

Why Tennessee Is a Strategic Growth Market for Children’s Lighthouse

why-tennessee-is-a-strategic-growth-market-for-childrens-lighthouse

Comfort Keepers

Comfort Keepers Eyes Salt Lake City for Expansion: Meeting the Rising Demand for In-Home Senior Care in Utah

comfort-keepers-eyes-salt-lake-city-for-expansion-meeting-the-rising-demand-for-in-home-senior-care-in-utah

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 Development Website Builder

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

McDonald’s Launches New Extra Value Meals as Consumer Demand for Value Continues to Climb

mcdonalds-launches-extra-value-meals

Power Eats: Smoothie King Rolls Out Food Nationwide To Fuel Franchise Growth

smoothie-king-food-menu-power-eats

Keurig Dr Pepper Splits in $18 Billion JDE Peet’s Deal, Creating Global Coffee Giant

keurig-dr-pepper-splits-in-18-billion-jde-peets-deal-creating-global-coffee-giant

McDonald’s Rolls Out Major Value Push To Win Back Customers Amid Inflation

mcdonalds-rolls-out-major-value-push-to-win-back-customers-amid-inflation

Photo of Paris Baguette pastries and beverages 

Paris Baguette Celebrates 250th Café Opening in Frederick, Maryland, Accelerating Expansion and Reviving the Neighborhood Bakery Café

paris-baguette-250th-north-america-cafe

Franchise Deep Dive graphic with i9 Sports logo

i9 Sports Franchise Costs, Fees, Profit and Data for 2025

i9-sports-franchise-cost-fees-profit

911 Restoration Franchise Costs, Fees, Profit and Data for 2025

911-restoration-franchise-deep-dive

Unlocking Franchise Growth: Why Investors Are Turning to Sola Salons and Woodhouse Spas

radiance-holdings-sola-woodhouse-franchise-investment

Jollibee -Launch-Story-Brand-Page-Deep-Dive-2025

Jollibee Franchise Costs, Fees, Profit and Data for 2025

jollibee-franchise-costs-fees-profit-and-data-for-2025

Hooters Leans Into Franchising With Closure of 30 Company-Owned Stores - Agg - 1851 Franchise

Hooters Leans Into Franchising With Closure of 30 Company-Owned Stores

hooters-franchise-model-company-owned-closures

graphic image of a franchisee spotligh aman kaur of voodoo brewing

How This Trio of Friends Is Brewing Up Community With Voodoo Brewing Co. in Prosper, Texas

voodoo-brewing-franchisee-aman-kaur-prosper-texas

Hely and Hiral Patel Bring Their Longtime Dream to Life With The Brass Tap

brass-tap-franchise-pasadena-maryland-hely-hiral-patel

Franchisee spotlight graphic with photo of Ricki Oberoi and Layne's Chicken Fingers logo

Multi-Unit Wendy’s Operator Signs 12-Unit Deal With Layne’s Chicken Fingers

ricki-oberoi-laynes-chicken-fingers-growth

How Vishal Juneja Turned a Family Tradition Into a Paris Baguette Franchise

How Vishal Juneja Turned a Family Tradition Into a Paris Baguette Franchise Built on Heart and Community

paris-baguette-franchise-rockaway-new-jersey-vishal-junjea

How to review item 20

MORE STORIES LIKE THIS