How to Read an FDD Item 19 Without Fooling Yourself

Item 19 is where a franchisor may put sales or earnings claims. It is optional. If the number is there, the FTC says it needs a reasonable basis, and you have a right to ask for written substantiation. If the number is missing, treat any verbal "you'll make X" pitch as a red flag.

This guide is how Zorzee reads Item 19: what the filing is allowed to say, what the average is hiding, and which questions to ask before the brand makes your shortlist.

What Item 19 is (and is not)

Under the FTC Franchise Rule, financial performance representations belong in Item 19 of the Franchise Disclosure Document. The franchisor does not have to provide one. If it chooses to, the claims about sales or earnings must appear there, with the bases and assumptions disclosed.

Two rules matter immediately:

1. If they talk numbers in a sales call, those numbers should be in Item 19. The FTC is blunt: spoken or written earnings claims that do not appear in the FDD are a problem. Ask for the Item 19 page, not a napkin math deck.
2. You can demand written substantiation. If Item 19 makes a claim, you have a legal right to the written backup that supports it. Ask. Keep what they send.

Sources: FTC Franchise Fundamentals, FTC Consumer's Guide: Evaluating Potential Earnings.

The five traps that make a "good" Item 19 look better than it is

1.Average without the distribution

An average income or average unit volume can be pulled up by a handful of strong outlets. The FTC calls this out directly: a few highly successful locations can hide disappointing results elsewhere.

Read for: median, ranges, quartiles or tiers (top 25% vs bottom 25%), and the percentage of outlets that met or exceeded the average. If you only get a single average, you do not know where a typical new owner lands.

2.Gross sales without costs

High gross sales are not profit. Rent, labor, royalties, ad fund, and debt service sit under that line. The FTC notes that gross sales figures do not show actual costs or profits.

Read for: whether Item 19 stops at revenue, or includes a P&L (or enough cost categories to model one). Then pull Item 6 fees and Item 7 investment so you can build a buyer-side view.

3.Company-owned results sold as franchisee results

Company outlets often have different costs than a franchisee will. Lower supply prices, different rent, different labor. If profits are based on company data, ask how that maps to a franchised unit.

Read for: franchised vs company-owned sample, and whether the filing says the two were mixed.

4.Cherry-picked samples

Mature units only. Top markets only. Excluding first-year stores. Excluding closures. The sample definition is the story.

Read for: how many outlets were in the system, how many were in the Item 19 set, the time period, geography, and every exclusion. Compare that set to Item 20 (openings, closures, transfers).

5.No Item 19 at all

Optional means some brands disclose nothing. That is information. It does not automatically mean the brand is bad. It does mean you cannot lean on a franchisor earnings claim in the FDD, and you should not accept verbal substitutes. Your fact-check shifts harder onto franchisee validation calls from Item 20 and onto your own model.

A practical read order (15 minutes on a new FDD)

1. Find Item 19. Present or absent? One page or a packet?
2. Copy the headline metric. AUV, revenue, EBITDA, something else?
3. Copy the sample size. N of outlets. N in the subset. Time window.
4. Note franchised vs company. Mixed or separate tables?
5. Hunt the distribution. Median, quartiles, % at or above average. If none, mark "average only."
6. Hunt exclusions. Maturity filters, geography filters, closed stores left out.
7. Cross-check Item 6. Royalty + brand fund + required fees = ongoing drag on whatever revenue number you just read.
8. Cross-check Item 7. Startup range and working capital vs the ramp the Item 19 implies.
9. Cross-check Item 20. Closures and transfers. If the system is shedding owners, ask whether the Item 19 sample still looks like a place you want to enter.
10. Write three validation questions for current and former franchisees before you get on a sales call.

Questions to ask franchisees (after you read Item 19)

Use Item 20 contacts. Ask people whose unit looks like the one you would buy (market size, single-unit vs multi-unit, years open).

• How long to breakeven, in your market?
• Does the Item 19 number feel real for a unit like yours, or only for the best stores?
• What costs surprise first-year owners that never show up in the brochure?
• Would you buy this brand again?

If franchisee answers do not line up with Item 19, that gap is the finding. The FTC says the same thing: treat mismatch as a red flag.

How Zorzee uses Item 19

Zorzee starts with the filing, not the brand deck. On each brand we cover, we flag whether Item 19 is disclosed, structural, or absent, and we read it next to fees, litigation, and Item 20 movement.

If you want the short version we already publish on the homepage: a strong Item 19 gives average unit volume or a fuller P&L with sample size and the share of units that hit the average. A weak one shows a top-quartile figure, a system-wide total with no per-unit number, or nothing at all.

Browse brands in the Portal, or start with the free Tuesday Report. New here? Is Zorzee worth it?

Common questions

What this page will not do

It will not replace a franchise attorney or CPA. It will not invent an earnings number for a brand that left Item 19 blank. It will not turn an average into a promise.

Your job after Item 19 is still validation calls, a real cost model, and a clear walk-away line.