Franchise Item 19 Explained: How to Read Earnings Claims Without Getting Sold

Ask a franchise salesperson what owners make and watch what happens. Some will point you to a page in the disclosure document. Some will change the subject. And some will tell you a number over the phone that appears nowhere in writing. Only the first answer is worth anything.

That page is Item 19 of the Franchise Disclosure Document. It is the only place a franchisor is allowed to tell you what its units earn, and it is the most misread section in the whole document.

What Item 19 is, and what it isn’t

The FDD has 23 required items. Item 19 covers “financial performance representations,” which is legal language for any claim about sales, income, or profit. Franchisors don’t have to include one. If they skip it, Item 19 has to say so.

Here’s the part most buyers never hear: under the FTC’s Franchise Rule, a franchisor and its salespeople can’t give you earnings figures that aren’t in Item 19. There are narrow exceptions, like the actual records of a specific existing unit you’re buying. But a rep who tells you “our owners do about $800K” when Item 19 is blank is either freelancing or bending a federal rule. Either way, you’ve learned something about the brand.

No Item 19 is an answer

The franchisor has the numbers. It collects royalties on its owners’ sales, so it knows what they ring up. When it declines to publish any of it, the likeliest reason is that the numbers don’t sell the franchise. Some brands have other reasons, like a young system or wide swings between markets, but the burden is on them to explain it, not on you to guess.

That’s why a brand without a full Item 19 doesn’t make The 250.

Five things to check when there is an Item 19

1. Whose numbers are these? Look at how many units are included out of the total. A table built from the top quarter of locations, or with company-owned stores mixed in, tells you about the best case, not about you.
2. Revenue or profit? Most Item 19s report gross sales. That’s the top line, before rent, labor, royalties, marketing fees, and your own salary. A $900K store can leave its owner with very little.
3. Average or median? A few big performers can pull an average far above what a typical owner sees. If a median is shown, trust it more. If only an average is shown, look for how many units actually hit it. That count is often disclosed, and often sobering.
4. What got left out? Read the footnotes. Units open less than a year, units that closed during the year, and nontraditional locations are commonly excluded. Each exclusion makes the numbers look better.
5. Can they back it up? Item 19 claims need a reasonable basis and written substantiation, which the franchisor must provide on reasonable request. Ask for it in writing. How they respond is data too.

Turn Item 19 into your own numbers

Item 19 is a starting point, not a forecast. Take the revenue figure that best matches the unit you’d actually open, not the top performer. Subtract the ongoing fees listed in Item 6, like royalties and marketing funds. Then estimate your local rent, labor, and insurance. What’s left is much closer to what you’d take home.

Then test it. Item 20 lists current franchisees and those who left in the last year, with contact information. Call a few, including some who left. Ask what their first two years really looked like. Owners who aren’t on the franchisor’s curated reference list tend to be more candid.

The short version

A full, clear Item 19 doesn’t make a franchise good, and a missing one doesn’t prove it’s bad. But a franchisor that won’t show you the numbers is asking you to invest on faith, and faith isn’t a due diligence method.

Want to start with brands that show their numbers? Take the free assessment. It matches you on capital, time, and goals across five industries, and no brand pays to be on the list. For more on sorting options, read How to Shop Franchises Like They’re Not Shopping You.