What is Franchise Item 19 and Why is It Important? A Guide

What is franchise Item 19 and why is it important? For potential franchise owners, reviewing a Franchise Disclosure Document (FDD) for the first time can be intimidating. Item 19, in particular, can feel both exciting and confusing. Often filled with charts, averages and a whole lot of financial data, Item 19 outlines a franchisor’s financial performance representations. A full understanding of just what Item 19 does cover – and what it doesn’t – are equally important parts of any franchise investment decision. 

What Item 19 Actually Shows

Item 19 provides historical financial performance data for a given franchise system (if and when the franchisor decides to disclose it). Such data may include elements like average unit volumes (AUVs), general sales ranges, cost of goods and other operational metrics. But when it comes to the FDD and Item 19, context is everything.

“Item 19 paints a picture of the business and how it’s going. Of course, the biggest thing I can say about that picture is that it’s not always a complete picture. It’s not always the best representation of what’s going on out there, in my personal opinion,” said Taylor Thomas, a multi-brand franchisee with Layne’s Chicken Fingers* and Whataburger. “So what we do is use it as a tool. It’s never going to tell us if we’re going to jump in with a brand – but it’s never going to tell us that we’re not.”

Why Item 19 Matters

Understanding what Item 19 is as well as why it’s important can help prospective franchise owners ask more informed questions as part of a strong franchising due diligence process. So, what is franchise item 19 and why is it important?

Here are five areas to consider.

Practical Ways to Use Item 19

• Use It as a Baseline (Not a Forecast). “Item 19 is from the past,” Thomas said. “It’s not the future.”
   
• Ask the Franchisor Direct Questions During Franchise Discovery Day. “I’m going to ask them everything that’s in Item 19, just to see what they say.”
   
• Talk to Current Franchisees. “They’re going to give you a list of all their franchisees. Start calling every single one of them.”
   
• Visit Franchise Locations in Person. “Just show up to their stores. See what’s happening. Talk to them.”
   
• Evaluate Leadership, Culture. “If I were going out to eat dinner, would I want that person sitting across from me?”

The Takeaway

What is franchise Item 19 and why is it important? FDD Item 19 can offer valuable information. But only when paired with thoughtful questions, firsthand research and honest self-assessment (often as a critical component of franchise Discovery Day). When Item 19 is treated as a small piece of the larger franchising due diligence puzzle, potential zees can look ahead with clarity and confidence, exerting greater control over potential franchise investment decisions.

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