Item 19 financial representations in franchising are crucial for helping prospective franchisees make informed investment decisions. Here’s why they matter—and how franchisors should present them.

Why Item 19 Matters

1. Increases Franchise Sales & Conversions
   Sharing a track record of financial success builds trust and speeds up the decision-making process for potential franchisees.

2. Supports Informed Decision-Making
   Franchisees need insights into expected revenue, costs, and profitability before investing.

3. Creates a Competitive Advantage
   Franchisors who disclose strong, transparent data stand out and attract more serious candidates.

4. Reduces Legal Risks
   Without Item 19, franchisors legally can’t discuss financial performance with prospects. A clear disclosure protects both parties from misrepresentation or disputes.

5. Builds Transparency & Trust
   Financial transparency leads to better-prepared franchisees and improved system performance overall.

How to Present Item 19

1. Use Clear, Accurate, and Consistent Data
   The numbers must align with actual franchise operations.

2. Disclose the Data Source
   Clarify if the numbers come from franchise units, company-owned locations, or a mix.

3. Include Key Financial Metrics
   Focus on revenue, gross profit, cost of goods sold, labor, occupancy, SG&A, and EBITDA—don’t overcomplicate.

4. Add Context
   Note sample size, timeframes, and locations to provide a full picture.

5. Use Footnotes
   Explain variations in performance due to rent differences, natural disasters, or store models.

6. Avoid Misleading Data
   Do not overstate earnings potential or omit risks.

7. Stay FTC & State Compliant
   Ensure your disclosure meets all federal and state legal requirements.