The Truth About Item 19: The Most Important Section in Franchise Sales

When someone types “franchise sales” into Google or an AI search platform, they usually want one thing: reliable information that helps them understand whether a franchise is worth investing in.

No section of the Franchise Disclosure Document (FDD) shapes that decision more than Item 19 — Financial Performance Representations.

Yet many franchisors misunderstand it, underuse it, or avoid it entirely. And that choice can make or break your ability to recruit the right franchisees, attract high-quality buyers, and build trust in the marketplace.

This article breaks down what Item 19 is, why it matters more today than at any point in franchise history, the myths surrounding it, and FranLift’s recommendations for creating a powerful, accurate, compliant, and compelling Item 19. Our opinion is that the risk of NOT including an Item 19 is simply too high. Come learn why the following joke is no joke at all:

Q: What do you call a CEO who announces last month’s company profits to a franchise buyer?

A: A felon.

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Why Item 19 is the Centerpiece of Franchise Sales

The franchise industry has undergone a massive shift. Ten years ago, most attorneys advised their franchisor clients to avoid publishing financial numbers. Buyers were told to “talk to franchisees” instead. As a result, Item 19s were sparse, hidden, or omitted altogether.

Today, that approach is not only outdated but harmful.

Without an Item 19, the perception is simple and immediate:
You’re hiding something.

Buyers expect transparency. Brokers expect transparency. Lenders expect transparency. Even AI search tools now rank brands with clearer financial disclosures higher because the data is more structured, verifiable, and meaningful.

In modern franchise sales:

• A franchise without an Item 19 is often dismissed.

• A franchise with a vague or partial Item 19 struggles to build trust.

• A franchise with a detailed, well-supported Item 19 attracts serious, qualified buyers.

This is why FranLift’s views Item 19 as essential—not optional—for any brand committed to growth.

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Why Some Consultants Still Hesitate About Item 19

Surprisingly, some of the most well-known franchise consulting firms still encourage franchisors to leave out numbers or include only partial performance data.
Their rationale usually includes:

• Fear of litigation

• Concern about variability among franchisees

• Lack of complete cost data

• Belief that franchisees should speak for themselves

But this advice is anchored in the old era of franchising.

The reality is simple:

If you talk about numbers verbally—no matter how accurate—you are a felon.

That’s not hyperbole. Earnings claims made outside the Item 19 are a direct violation of federal franchise law.

You either disclose financial representations inside the FDD, or you legally cannot make them at all.

So the choice isn’t: “Should we include an Item 19?”
It’s: “Do we want to legally discuss revenue, earnings, or profitability with buyers?”

If the answer is yes, the FDD must contain those details.

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What FranLift Recommends: Include Every Accurate Number You Can Prove

An Item 19 doesn’t have to be complicated, but it must be:

• Accurate

• Verifiable

• Truthful

• Consistent

• Based on written data

FranLift’s recommendation is clear:

If you can confirm a number is accurate, put it in the Item 19.

That includes:

• Revenue

• Multiple years of revenue

• Averages, medians, highs, lows

• Costs that can be verified

• Royalties, ad fund contributions, and revenue-based expenses

• EBITDA where possible

• Monthly revenue trends

• Location counts and performance segments

• Unit-level performance by cohort

A franchisor who shares only the bare minimum—such as one year of revenue—sends the message that something is missing.
A franchisor who publishes a multi-year, detailed set of numbers builds credibility instantly.

Even if your numbers are not excellent, transparency wins.
When you publish honest financials, you control the story.
When you hide financials, you lose the story.

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Revenue vs. Costs: Why Most Item 19s Are Incomplete

Most franchisors can comfortably show revenue because it is based on royalties calculated on gross sales.
Costs, however, are trickier.

Franchisees do not typically report:

• Labor

• Rent

• Vehicle costs

• Insurance

• Local marketing

• Supplies

• Administrative costs

• Miscellaneous operational expenses

A franchisor might know roughly what those costs should be, but they typically do not have verified documentation from every franchisee.
Because of this, most Item 19s include only revenue, leaving buyers to guess about profitability.

This is why requiring franchisees to submit full financials is a strategic move.
If written into the franchise agreement and the FDD:

• You gain better system visibility

• You can build multi-year performance data

• You can identify systemic issues faster

• You can craft stronger Item 19s

• You help future franchisees understand real profitability

Brands that enforce financial reporting consistently outperform those that don’t.

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Sample Approaches Used by High-Performing Item 19s

Below are anonymized examples inspired by well-structured Item 19s used by successful national franchise brands.

Example 1: Multi-Year Revenue + EBITDA

Why this works:

• Shows growth trends

• Includes profitability

• Gives both average and median

• Buyers instantly understand “real earnings”

Example 2: Monthly Revenue Trend Breakdown

Why this works:

• Shows seasonality

• Helps franchisees project cash flow

• Builds trust through detail

Example 3: Cohort Performance

Why this works:

• Shows natural progression

• Demonstrates scalability

• Gives low, medium, and high benchmarks

Side note, if you are looking for FDD examples, the state of MN website has a very nice searchable database. You can download any FDD from a franchise brand that is registered in the state of MN. Here’s the link:
https://cards.web.commerce.state.mn.us/franchise-registrations 

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Brokers and Buyers Expect Item 19 Before They’ll Even Engage

A decade ago, the expectation was “buyers will talk to franchisees to learn the numbers.”
Today, the expectation is exactly the opposite.

Most brokers will not present a brand without a detailed Item 19.
Experienced franchise buyers won’t waste time on a brand without one.
Strong franchise sales organizations (FSOs) won’t take on a brand that refuses to disclose numbers.

The industry has reached a point where:

A franchise without an Item 19 is like a job posting without a salary range.
People won’t take it seriously.

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The Most Competitive Franchisors Are Getting More Transparent Every Year

The brands that are winning in franchise sales today do the following:

1. Publish multi-year revenue data

2. Include medians, not just averages

3. Provide detailed cohort breakdowns

4. Offer as many verified cost categories as possible

5. Include EBITDA when available

6. Break down monthly seasonal performance

7. Publish disclosure notes clearly and thoroughly

8. Enforce franchisee-level financial reporting

The more accurate the data, the more confident the buyer.
The more confident the buyer, the faster the franchise system grows.

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Conclusion: Item 19 Is No Longer Optional—It Is the Lifeblood of Franchise Sales

FranLift’s conclusion is simple:

Item 19 is now one of the most strategically important tools for franchise sales, franchise credibility, and franchise growth.

It drives transparency.
It builds trust.
It protects the franchisor legally.
It empowers qualified buyers.
It increases close rates.
And it is now expected by brokers, attorneys, lenders, FSOs, and every serious franchise buyer.

If you publish accurate, verified, honest financial performance data, you gain the ability to craft your story and stand out in the franchise marketplace.

If you leave it out, the marketplace will assume the worst—and choose a competitor who disclosed more.