No Item 19? No Thanks. Why Earnings Claims Matter More Than Ever

Franchising is built on the promise of a proven business model. But how can you evaluate a business opportunity if the franchisor refuses to share any financial performance data? The answer: you can't. And yet, many franchisors still choose to omit Item 19 from their Franchise Disclosure Document (FDD).

Item 19 is where a franchisor has the option (not the obligation) to provide Financial Performance Representations (FPRs). That means data like average gross revenue, net income, or other financial metrics from operating units. When a franchisor doesn’t include Item 19, they’re essentially asking you to invest blindly.

That’s not just risky, it’s unacceptable.

What Item 19 Tells You (When It’s Included)

Item 19 can disclose a range of performance indicators, such as:

• Average or median gross sales across locations

• Net profits, EBITDA, or cost breakdowns

• Performance by region or location type (e.g., mall vs. street)

• Corporate-owned vs. franchisee-owned unit performance

Not all Item 19s are created equal, but when included, they at least give you a starting point to evaluate the opportunity.

When Item 19 Is Missing

Franchisors who leave out Item 19 will usually include a generic disclaimer, like:
"We do not make any representations about the financial performance of a franchise. You should conduct an independent investigation of revenues and profits."

Translation? "Good luck. We’re not telling you anything."

This is often a red flag. Especially if the brand is new, unproven, or aggressively expanding.

Why It Matters More Than Ever

In today’s economy, with rising interest rates, tighter consumer spending, and increased operating costs, franchisees can’t afford to guess. You need to know:

• What you can reasonably expect to earn

• How long it takes to break even

• What operating costs will eat into your revenue

If a franchisor won’t provide any of that data, you have to ask: why not?

Common Reasons Franchisors Omit Item 19 (And What They Really Mean)

1. "We don’t want to make misleading claims."
   Sounds responsible, but may really mean: "Our numbers aren’t strong enough to share."

2. "We leave it up to franchisees to share their experiences."
   Translation: "We’re shifting all responsibility and avoiding accountability."

3. "We’re still a new brand."
   If they don’t have performance data yet, that’s fair, but you’re taking a high-risk bet.

How to Protect Yourself If there’s no Item 19, here’s what you should do:

• Ask for unit-level financials from existing franchisees.
  Most FDDs list current operators in Item 20 Exhibit G. Call them and ask:

  • What’s your monthly revenue?

  • What’s your breakeven point?

  • What expenses surprised you most?

• Request any internal earnings materials used during the sales process.
  If a franchisor emailed you spreadsheets or pro formas, they may have already made a financial performance representation, even if it's not in the FDD.

• Consult a franchise attorney.
  They can help assess whether the absence of Item 19 poses legal concerns or violates FTC guidance if paired with oral claims.

Franchisee Tip: Even a weak Item 19 is better than none. It shows the franchisor is willing to be transparent and give you something to work with.

Bottom Line
No Item 19? No thanks.

Financial transparency should be the bare minimum when you’re considering investing tens or hundreds of thousands of dollars. If a franchisor refuses to share earnings data, consider what else they might not be telling you.

Your future depends on facts, not faith.

Because once you sign, it’s too late for a reality check.