One number sells the franchise. Here is how to tell if it is real.
Item 19 is the only place a franchisor puts earnings in writing, and the easiest place to dress them up while staying perfectly legal. This is the deepest chapter in the guide.
This chapter runs from the few things every buyer must know, at the surface, down to the detail only some will need, in the trench. It darkens as you go deeper. Scroll to begin.
The few things every buyer needs before reading a single figure.
- Leads with a median, not just an average
- Shows how many franchisees hit the number
- Counts the weak and closed units too
- Names the period, the sample, and excluded costs
- One high average from a hand-picked group
- No count of who actually reached it
- Quietly drops the units that failed
- Vague dates, vague sample, hidden costs
What Item 19 actually is
"Item 19" is the section of a Franchise Disclosure Document where a franchisor may make a Financial Performance Representation: a statement about what its outlets earn. It is the only place in the FDD that earnings appear at all, which is what makes it the highest-stakes page you will read. The same underlying business can be made to look like a goldmine or a coin flip depending on which units the franchisor counts and which number it leads with.
Item 19 is governed by the FTC Franchise Rule, and three points decide how to read it. One: a franchisor does not have to make an earnings claim at all. Many disclose nothing, and that is legal. Two: if they do make one, it must have a reasonable basis and written substantiation they are required to give you on request, so always request it. Three: outside of Item 19, a franchisor and its salespeople generally may not tell you what you will earn. A number quoted to you that is not written in Item 19 is both a rule violation and a warning sign. The one narrow exception: they may show you the actual financials of the specific outlet you are buying.
Before anything else: is there an Item 19 at all? "We do not make any financial performance representations" is not automatically a red flag, but it means the franchisor will not stand behind a single earnings number in writing. If so, you get your numbers the only honest way left: by calling franchisees from the Item 20 list yourself, which is exactly where this chapter ends.
Everything below is what they hope you skim.
The surface is the pitch. The depth is the disclosure. From here on it is more detail, and a little less essential, the deeper you go.
Paste a clip of your Item 19. We point out what matters.
Paste a clip or section of Item 19, even a few lines of the earnings table or the notes is enough, and we check that snippet: the single most important issue, what the text does not say, and the exact questions to take to your attorney and to current and former owners. Evidence only. No score, no verdict, no guessing.
Reading the Item 19…
Advanced issues found
What the text actually says
What is missing
Questions for your attorney
Questions for current and former franchisees
Read literally from the Item 19 text you pasted. This is not legal, financial, or investment advice, and it is not a verdict on the franchise. These are starting questions for your franchise attorney and your own diligence.
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Read the free guideThis is the most useful level: six questions that tell an honest earnings claim from a dishonest one. None asks "how much will I make." Every one asks "is this franchisor being straight with me."
A median, not just an average?
Good A median or the full distribution.
Watch A lone "average": one big outlet inflates it.
How many actually hit it?
Good The percent (and count) who reached the figure.
Watch A number with no "X% attained this." A target, not typical.
Whose numbers are these?
Good All units, with any exclusions defined.
Watch A cherry-picked "top quartile," sold as typical.
Are the failures in the data?
Good Underperforming and closed units are included.
Watch "Currently operating only": survivorship bias.
Revenue, or real profit?
Good Costs shown, so you see what is left.
Watch Gross sales only. That is not income.
Period and cohort defined?
Good The dates, the count, and unit type are named.
Watch Vague dates, or company stores passed off as yours.
1. A median, not just an average. An average is dragged upward by a few exceptional outlets, so it overstates the typical result. The median, the middle outlet, is what an ordinary owner is closer to. The most honest disclosures show the full distribution, often by quartiles. If you see only an average, the median is almost certainly lower, and you should ask for it.
2. How many actually hit it. A figure means little without an attainment rate, the percentage of outlets that reached it. "Average sales of $900,000" is a different story if 60% of owners cleared it versus 8%. No attainment rate means the number is a target, not a typical outcome.
3. Whose numbers these are. Read the cohort definition. "Top quartile," "locations open five years or more," or "company-owned units" all describe a group that is not you. An honest Item 19 reports all units, or defines every exclusion and says what share of the system is left out.
4. Whether the failures are in the data. "Outlets in operation as of December 31" quietly removes the ones that closed, which makes the survivors look healthier than the system really is. This is survivorship bias. Cross-check the sample size against the unit counts in Item 20: missing units are missing stories.
5. Revenue, or real profit. Most Item 19s report gross sales, not profit. Gross sales is money in the door before rent, payroll, royalties, marketing fees, and supplies. A high gross can still leave little or nothing. If costs are not shown, you do not know what an owner keeps.
6. Period and cohort defined. Look for the dates, the unit count, and the unit type. Vague or stale periods, or company-run stores presented as a stand-in for a franchisee, are how a number stops meaning what it appears to mean.
The tests are abstract until you watch them work: the same business told two ways, a claim taken apart line by line, and the one piece of math behind most of it.
One inflated "average," everything else hidden
- A single big average, no median
- No count of who actually hit it
- Failed and closed units left out
- Only "top-performing, mature" locations
- Gross sales only, no costs
Looks like a goldmine. Tells you almost nothing.
The full spread, with the median marked
- A median and the full range
- The percentage who reached it
- Includes units that closed
- Every franchised location counted
- Costs shown, not just revenue
Less glamorous. Something you can actually decide on.
Illustrative of the two forms an Item 19 can take, not real franchise figures.
Illustrative wording, not a real franchise. Four ordinary phrases, four ways the same sentence can mislead while staying perfectly legal. An honest Item 19 closes every one of these gaps.
Picture ten franchises. Nine earn about $200,000 a year. One flagship earns $2,000,000. The average is $380,000. The median, the middle store, is $200,000. Same ten stores, a $180,000 gap, and only the average ever makes the brochure. That is why an "average" with no median is the first thing to question. (Illustrative figures.)
Useful background once you know the tests: the six common ways a franchisor can frame earnings. Each is legitimate; the dishonesty is in which one they pick and what they omit.
Gross sales / AUV
What it is Total revenue per outlet (Average Unit Volume), before any costs.
Watch Revenue is not income. A large gross number can still lose money after rent, labor, and royalties.
Average vs. median
What it is The average is one figure for the whole group; the median is the middle outlet.
Watch An average shown with no median is hiding the spread, and the median is almost always lower.
Net profit / EBITDA
What it is What is left after costs. The form an owner actually cares about.
Watch Rare, and the most honest when shown clearly. Still check which costs were left out.
Cohort figures
What it is Numbers for a subset: top performers, mature units, or one region.
Watch A hand-picked subset presented as if it were typical of the whole system.
"Up to" ceilings
What it is A maximum result, framed as a possibility ("earn up to $X").
Watch A ceiling is not a middle. Ask how many owners actually reached it.
Expense or ratio only
What it is Costs, margins, or ratios disclosed without the revenue behind them.
Watch Half the picture. You cannot judge income from a ratio alone.
If you remember one thing here: gross sales is not profit. Most Item 19s report revenue, which says nothing about what an owner takes home.
For the thorough: eight specific moves that cover almost every dishonest Item 19. Each is legal, and each has a tell.
The lone average
The move A single big "average," no median anywhere.
Spot it Ask for the median or the full range. If a handful of units carry the average, the median is well below it.
The cherry-picked cohort
The move Figures from "top performers," a "top quartile," or only mature locations.
Spot it Ask what percent of all units that group is. The best 25% is a target, not a typical result.
Survivorship
The move "Units operating as of [date]," quietly dropping the ones that closed.
Spot it Compare to Item 20. Ask how many opened in the period versus how many are in the figure.
Gross dressed as income
The move A large "average gross sales," with costs left out.
Spot it Gross is revenue, not take-home. Ask what is left after rent, labor, royalties, and supplies.
Company-owned in the mix
The move Corporate-run locations folded into the numbers.
Spot it Corporate stores get prime sites and scale you will not. Ask for franchised-only figures.
The "up to" ceiling
The move "Earn up to $X" or "as high as."
Spot it A ceiling is not a middle. Ask how many owners actually reached it.
The built-up number
The move "Average ticket times transactions" math instead of real results.
Spot it That is a model, not an outcome. Ask for actual unit-level figures and disclaimers.
Footnote burial
The move The caveats hidden in fine print or an appendix.
Spot it Read the footnotes first. They often undo the headline number entirely.
The deepest, least-glamorous level, and one of the most important actions: confirm the claim with the people living it, then the terms and our hard line.
The honest way to check an earnings claim is not more math. It is the people already living it. Item 20 lists current franchisees and everyone who left in the last year, with contact information. Call them.
"What did you actually net, not gross, in year one and year two? How long until you broke even? What surprised you about the costs?"
"Why did you leave? Would you sign again?" The people who exited have the least reason to sell you and often the most honest answer.
Does the Item 19 sample size line up with the unit counts in Item 20? Units missing from the figure are stories the franchisor chose not to count.
Why we report Item 19 figures but never recompute them
There is a hard line in this work, set by the FTC Franchise Rule and by basic honesty: an earnings figure may be reported exactly as disclosed, attributed, with the franchisor’s own disclaimers intact, but it may never be averaged, re-ranked, projected forward, or turned into a "potential profit." Anyone who hands you a tidy income projection built from an FDD is doing the exact thing this page warns you about. We grade how honestly the earnings are disclosed. We will never tell you what you will earn, because no one honestly can.
Questions buyers ask about Item 19
Does Item 19 tell me how much I will make?
No. It describes what some existing outlets earned, under the framing the franchisor chose. It is not a forecast for you, and we never turn it into one.
Is it a red flag if a franchise has no Item 19?
Not automatically. Disclosing none is legal. But it means no earnings number is backed in writing, so you must get your numbers by calling franchisees from Item 20.
Can a salesperson give me earnings numbers in person?
Generally no. Outside of Item 19, the FTC Franchise Rule prohibits financial performance claims. A verbal number that is not in Item 19 is a violation and a warning sign.
What is the single most useful thing to look for?
A median paired with the percentage of owners who reached it, on net figures rather than gross, covering all units. That combination is the hardest to dress up.
Average or median, which matters?
The median. The average is pulled up by a few big units, so when only an average is shown, the median is almost certainly lower.
How do I verify an Item 19?
Item 20 lists current and former franchisees with contact details. Call them, especially the ones who left, and ask what they actually netted in years one and two.
The terms, plainly
- Item 19 / Financial Performance Representation (FPR). The optional section where a franchisor may share figures about what its outlets earn. It is the only place earnings appear, and franchisors are not required to include one.
- Average vs. median. An average is pulled upward by a few top performers; the median is the middle outlet, usually much closer to a typical result. When only an average is shown, the median is probably lower.
- Distribution / range. Showing the full spread (for example by quartiles) rather than a single number. It is the most honest, most useful form.
- Attainment rate. The percentage of outlets that actually reached the figure shown. A number without an attainment rate is a target, not a typical outcome.
- Gross sales vs. net. Gross sales is money coming in before any costs; net is what is left after rent, labor, royalties, and supplies. A gross-sales figure is not take-home income.
- Cohort / sample. Which outlets the figures cover (all of them, or a defined subset) and over what time period.
- Survivorship bias. Reporting only outlets still open, which quietly leaves out the ones that closed and makes the average look healthier than reality.
- Company-owned vs. franchised units. Corporate-run locations often have advantages a franchisee will not, so their results are not a fair stand-in for yours.
This is one chapter. The full FDD diligence guide walks the rest: real costs, litigation, owner turnover, support, territory, and control. Item 19 is where the most money is won or lost, which is why it goes first.
Common questions about Item 19
What is Item 19 in an FDD?
Item 19 is the section of a Franchise Disclosure Document where a franchisor may make a Financial Performance Representation, a statement about what its outlets earn. It is the only place earnings appear in the FDD.
Does a franchisor have to provide an Item 19?
No. A franchisor is not required to make any earnings claim, and many disclose nothing, which is legal. If they do make one, it must have a reasonable basis and written substantiation they must give you on request.
What is the difference between an average and a median in Item 19?
An average can be pulled up by a few very high outlets, so a small number of strong units can make the typical result look far better than it is. A median is the middle value, closer to what a typical owner actually sees. An honest Item 19 leads with a median or the full distribution.
“Of the 214 outlets open the full year, the 158 that met our inclusion criteria had median gross sales of $612,000. 71 of those 158 (45%) met or exceeded it. These are gross sales, not profit, and exclude units that closed.”
It leads with a median, says how many hit it, defines the sample, and admits it is sales, not profit.
“Our top-performing locations have averaged over $1.4 million in annual sales.”
A single high average from cherry-picked “top performers,” no count of who reached it, and “sales” standing in for profit.
Illustrative wording, not a real franchise.
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Item 19 is the deepest chapter, but seven more parts of the FDD decide whether you get hurt. Read them all, in plain English. No signup, no cost.