1851

Located towards the bottom of a&nbsp;<a href="https://1851franchise.com/how-to-read-a-franchise-disclosure-document-fdd-2718823">Franchise Disclosure Document (FDD)</a>, Item 19 is one of the most important pieces of information within the 200-something pages that franchise candidates receive from brands during the research and vetting process. While all of the figures listed in an FDD should be clearly read and understood, Item 19 is a critical part of the puzzle when a potential franchisee is trying to calculate their profit potential.&nbsp;Referred to as the franchise performance representation, Item 19 shows candidates what their earnings could possibly look like as an owner with the brand. These numbers are an important part of the equation and need to be carefully considered.<h4>Look At Gross Profit Figures</h4>It’s important to make sure that you understand what each figure in Item 19 represents and to frame it with perspective. Typically, there will be a number listed for gross sales and gross profit; the latter will end up being how much the owner will net after the cost of goods and services is subtracted.&nbsp;“I think the most important, and probably the most overlooked, is the gross profit. That's the revenue minus what it costs to actually produce it and keep the lights on. It gives you a good idea of what the take-home amount will ultimately be,” explained&nbsp;<a href="https://www.linkedin.com/in/keven-elwood-42520a53/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=the-item-19-how-to-get-to-the-bottom-line-when-researching-franchise-concepts-2721856" target="_blank" rel="nofollow">Keven Elwood</a>, chief development officer at&nbsp;<a href="https://1851franchise.com/premiumservicebrands/">Premium Service Brands</a>.<h4>Don’t Accept It as Guaranteed</h4>One misconception shared by some franchise candidates is that the numbers stated on the FDD’s Item 19 are a guaranteed fact. These financial performance representations are averages of what existing units have achieved and should be a ballpark estimate for what a new owner entering the system can procure if they follow the model correctly.&nbsp;&nbsp;“There's no guarantee that you'll achieve those, but it does give you an idea,” explained&nbsp;<a href="https://www.linkedin.com/in/steve-beagelman-58535210/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=the-item-19-how-to-get-to-the-bottom-line-when-researching-franchise-concepts-2721856" target="_blank" rel="nofollow">Steve Beagelman</a>, founder of&nbsp;<a href="https://1851franchise.com/smbfranchising/info">SMB Franchise Advisors*</a>. “It will show you if it’s able to be enough of a revenue-generator for what you’re looking for.”For this reason, it is vital candidates aren’t overzealous when looking at what Elwood calls the “big shiny revenue numbers.” Some brands report the lowest, median and highest revenues, which allows for a more comprehensive picture of what ownership looks like, while others just display the very best-performing units.&nbsp;“An Item 19 is a great place to start, but thinking of those numbers as a guarantee is a mistake,” explained&nbsp;<a href="https://www.linkedin.com/in/bryan-lewis-press-waffle-co?utm_source=1851franchise.com&utm_medium=article&utm_campaign=the-item-19-how-to-get-to-the-bottom-line-when-researching-franchise-concepts-2721856" target="_blank" rel="nofollow">Bryan Lewis</a>, founder and owner of&nbsp;<a href="https://www.presswaffleco.com/franchise?utm_source=1851franchise.com&utm_medium=article&utm_campaign=the-item-19-how-to-get-to-the-bottom-line-when-researching-franchise-concepts-2721856" target="_blank" rel="nofollow">Press Waffle&nbsp;Co</a>. “At the end of the day, the success of an individual franchise location is going to come down to the owner and the work that they put in.”<h4>Beware of Missing Item 19s</h4>Franchises are not required by law to include their franchise performance representation in their FDD, but most companies do so to offer full transparency. Displaying revenue numbers for a system that is profitable is an easy way to further market itself as a great opportunity for return on investment.There are explainable reasons why some brands do not have a fleshed-out Item 19. New and emerging concepts often don’t have enough data readily available to include. It takes a least one full year of a franchise location operating before gross sales and profits can be reported.&nbsp;But if a company that is well-established and has been around for a significant period of time does not include numbers in their Item 19, “that can definitely be a red flag,” Elwood noted. It could be a sign that revenue isn’t great, that it’s been declining or a number of units have been closing.&nbsp;

The Item 19: How to Get to the Bottom Line When Researching Franchise Concepts

1851 Franchise

Understanding the franchise performance representation is paramount to making an informed decision.

the-item-19-how-to-get-to-the-bottom-line-when-researching-franchise-concepts

Mainland

Mainland Secures Nearly $10 Million in Media Value for Franchise Clients in Early 2025

mainland-secures-nearly-10-million-in-media-value-for-franchise-clients-in-early-2025

Mathnasium

How These Arizona Mathnasium Learning Centers Franchisees Expanded to 10 Locations 

how-these-arizona-mathnasium-learning-centers-franchisees-expanded-to-10-locations

BoConcept

BoConcept - Home Furnishing Franchise Agg - Santiago Sideboard - 1851 Franchise

Home Furnishings Business: BoConcept Introduces Santiago Sideboard by Morten Georgsen

home-furnishings-business-boconcept-introduces-santiago-sideboard-by-morten-georgsen

BooXkeeping

BooXkeeping Franchise Expands to Seminole County, Florida, with New Franchisee Ross Duhaime

booxkeeping-franchise-expands-to-seminole-county-florida-with-new-franchisee-ross-duhaime

Sylvan Learning

How Sylvan Learning Positions Franchisees for Institutional Partnership Success

how-sylvan-learning-positions-franchisees-for-institutional-partnership-success

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

Login

facebook

instagram

twitter

linkedin

youtube

Hooters - Bankruptcy Chapter 11 - 1851 Franchise

Hooters Prepares for Bankruptcy Amid Financial Struggles

hooters-prepares-for-bankruptcy-amid-financial-struggles

Burger King’s Parent Company Restructures Operations in China and the U.S. To Drive Growth

burger-kings-parent-company-restructures-operations-in-china-and-the-us-to-drive-growth

Papa Johns Faces Potential Takeover as Turnaround Efforts Continue

papa-johns-faces-potential-takeover-as-turnaround-efforts-continue

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

Restaurant Industry Set to Hit $1.5 Trillion in Sales in 2025 Despite Economic Pressures

restaurant-industry-set-to-hit-15-trillion-in-sales-in-2025-despite-economic-pressures

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

DOJ FTC Antitrust Guidelines - Franchise News - 1851 Franchise

DOJ and FTC Issue New Antitrust Guidelines with Implications for Franchising

doj-and-ftc-issue-new-antitrust-guidelines-with-implications-for-franchising

Taco Bell Joins the Beverage Boom With New Live Más Café Concept

taco-bell-joins-the-beverage-boom-with-new-live-mas-cafe-concept

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

Florida Franchisee Reflects on Success and Growth with Sylvan Learning

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

Domonique Downing - Big Frog Franchise - Fayetteville, GA - 1851 Franchise

Coca-Cola Scientist Finds Path to Autonomy with Big Frog Franchise in Fayetteville, Georgia

big-frog-franchise-fayetteville-georgia

The Item 19: How to Get to the Bottom Line When Researching Franchise Concepts

MORE STORIES LIKE THIS