By Keith L. Gross, Esq. · Gross Law Group, P.A. · Last reviewed October 22, 2026
Key takeaways
- Item 19 of a Franchise Disclosure Document (FDD) is the only place a franchisor may make a financial performance representation to prospective franchisees: what its outlets earn, or what you might earn (16 CFR § 436.5(s); § 436.9(c)).
- Franchisors are not required to make an Item 19 representation. If they don't, Item 19 must say so, and the sales team isn't supposed to give you earnings figures informally.
- A franchisor that makes a representation must have a reasonable basis and written substantiation, disclose the material bases and assumptions, and make the substantiation available on reasonable request.
- For historical figures, the most important numbers are usually how many outlets were included, how many met or exceeded the stated result, and which costs were left out.
- In Florida, intentionally misrepresenting a franchise's prospects or chances for success is unlawful under Fla. Stat. § 817.416.
What is a "financial performance representation"?
The FTC Franchise Rule defines a financial performance representation (FPR) broadly. It is any representation, whether oral, written, or visual, to a prospective franchisee, including one in the general media, that states, expressly or by implication, a specific level or range of actual or potential sales, income, gross profits, or net profits (16 CFR § 436.1(e)). The definition expressly includes charts, tables, and mathematical calculations that show possible results based on a combination of variables.
So a salesperson's "most of our owners clear six figures by year two," or a spreadsheet showing "your revenue at 20 jobs a week," can be an FPR even if it never appears in a brochure.
The rule: earnings claims go in Item 19, or they don't get made
A franchise seller may not give prospective franchisees an FPR unless the franchisor (1) has a reasonable basis and written substantiation at the time the representation is made, and (2) includes the representation in Item 19 (16 CFR § 436.9(c)). When the representation concerns the past performance of the franchisor's outlets, the seller must also disclose the dates when the reported results were achieved and the number and percent of included outlets that attained or surpassed them. It must also include a clear and conspicuous warning that a new franchisee's individual results may differ (§ 436.9(c)(1)–(2)).
The Rule recognizes two situations in which financial information may be given outside the Item 19 disclosure itself (§ 436.5(s)(1), (4)–(5)):
- Actual operating results of a specific existing outlet being offered for sale, given only to potential buyers of that outlet; and
- A supplemental representation about a particular location or variation, but only if the franchisor already makes an Item 19 representation. The supplement must be in writing, explain how it departs from Item 19, and be prepared under the same Item 19 disclosure requirements (§ 436.5(s)(5)).
If Item 19 has no representation
If a franchisor makes no FPR, Item 19 must include prescribed language. It must say that the franchisor does not make representations about a franchisee's future financial performance or the past performance of company-owned or franchised outlets, and that it does not authorize employees or representatives to make them. It may provide the actual records of an existing outlet you are buying. And if you receive other financial performance information or projections, you should report it to franchisor management, the FTC, and the appropriate state regulators (§ 436.5(s)(2)).
What it means for you: An Item 19 with no representation is legal, and it isn't proof of a bad system. But you'll need to build your own financial picture from Items 5–7 (costs), Item 20 (outlet openings, transfers, and closures), Item 21 (the franchisor's financial statements), and conversations with current and former franchisees. If a salesperson gives you earnings numbers anyway, write down who said what, and when.
If Item 19 has numbers: what the franchisor must disclose
When a franchisor makes an FPR, Item 19 must disclose (§ 436.5(s)(3)):
- Type: whether it is a historical representation about the system's existing outlets (all or a subset) or a forecast of your future performance.
- For historical figures, the material bases, including: whether the figures cover all outlets or only a subset with particular characteristics (such as location type, how long outlets have operated, goods or services sold, and whether they are franchised or franchisor-owned); the dates the results were achieved; the total number of outlets in the period and, if different, how many had the described characteristics; the number of outlets whose data were used; of those, the number and percent that attained or surpassed the stated results; and characteristics of the included outlets that may differ materially from the outlet offered to you.
- For forecasts: the material bases and assumptions, such as economic or market conditions affecting sales, cost of goods or services, and operating expenses.
- A clear and conspicuous admonition that a new franchisee's individual results may differ.
- A statement that written substantiation will be made available on reasonable request.
How to read Item 19: eight questions
- Which outlets are in the sample, and which are out? "Top-performing 25%" or "outlets open at least three years" can be legitimate subsets, but they tell you less about a brand-new unit.
- Gross sales or profit? Many Item 19s report gross revenue only. Revenue is not take-home income.
- What costs are excluded? Look for royalties, advertising fund contributions, technology fees, rent, labor, owner salary, debt service, and depreciation, and compare them against Items 6 and 7.
- Median vs. average. A few large outlets can pull an average up. If only averages appear, ask whether the franchisor will share medians and ranges.
- How many met the number? For historical figures, the Rule requires the number and percent of included outlets that attained or surpassed the stated result. Find it.
- Company-owned vs. franchised. Company-owned outlets may have different cost structures, locations, or support.
- Time period and trend. One strong year isn't a trend. Compare with prior years' FDDs if you can get them.
- Does Item 20 tell a different story? High transfer, termination, or "ceased operations" numbers in Item 20 next to upbeat Item 19 figures deserve a hard look.
Then ask for the substantiation. The franchisor must make written substantiation for its Item 19 representation available on reasonable request (§ 436.9(d)). Also ask whether anything has changed. When furnishing the FDD, the seller must notify you of material changes it knows or should have known about in the information in Item 19 (§ 436.7(d)).
Red flags
- Earnings figures in emails, texts, webinars, or "pro formas" that don't appear in Item 19.
- An Item 19 with no representation, paired with a sales pitch about what owners "typically" make.
- Statements that contradict the FDD. The Rule prohibits claims that contradict required disclosures (§ 436.9(a)).
- Agreements or questionnaires asking you to disclaim or waive reliance on representations in the FDD itself. A franchise seller may not do this (§ 436.9(h)).
- A sample that is tiny or hand-picked compared with the size of the system.
Florida angle: § 817.416 and misrepresented "prospects for success"
Fla. Stat. § 817.416 ("Franchises and distributorships; misrepresentations," often called the Florida Franchise Act) makes it unlawful, when selling or establishing a franchise or distributorship, to intentionally misrepresent the prospects or chances for success of a proposed or existing franchise or distributorship, or to intentionally misrepresent the known required total investment (§ 817.416(2)(a)). A person who shows a violation in civil court may receive a judgment for all moneys invested. The court shall award reasonable costs and may award reasonable attorney's fees (§ 817.416(3)). The statute has its own definition of "franchise or distributorship," and intent must be shown, so whether it applies depends on the facts.
For franchisors: building an Item 19 you can support
- Build it from data you can substantiate in writing, and keep the file. You must make it available on reasonable request.
- Define the sample honestly. Disclose exclusions, the outlet counts, and how many met or exceeded the figure.
- Label revenue as revenue. If you show costs, show the material ones.
- Train the sales team. Every number they share must come from Item 19 (or a compliant supplemental representation).
- Keep it current: update the FDD within 120 days after fiscal year-end, prepare quarterly revisions for material changes, and tell prospects about material changes to Item 19 information (16 CFR § 436.7).
- Check state requirements. Registration states review the FDD, including Item 19, as part of registration, and may have their own rules.
Frequently asked questions
Is a franchisor required to include a financial performance representation in Item 19?
No. A financial performance representation is optional. But if a franchisor makes any earnings claim to prospective franchisees, it must have a reasonable basis and written substantiation for the claim, and the claim must be included in Item 19 (16 CFR §§ 436.5(s), 436.9(c)).
What does it mean if Item 19 says the franchisor makes no financial performance representations?
The franchisor is stating that it does not make representations about past or future financial performance and does not authorize its employees or representatives to make them. The one exception the Rule allows is the actual records of an existing outlet you are considering buying. You will need to build your own estimates from Items 5–7, 20, and 21 and from conversations with current and former franchisees.
Can I get the data behind Item 19?
Yes. The franchisor must make written substantiation for its Item 19 representation available to prospective franchisees on reasonable request (16 CFR § 436.9(d)), and Item 19 must say so (§ 436.5(s)(3)(v)).
Is gross revenue in Item 19 the same as profit?
No. Many Item 19s report gross sales only. You still have to account for royalties, advertising contributions, rent, labor, and other costs disclosed elsewhere in the FDD.
What should I do if a salesperson gave me earnings numbers that are not in Item 19?
Write down what was said, by whom, and when, keep any documents, and talk to a franchise attorney before you sign. Earnings claims made outside Item 19 can matter under the FTC Franchise Rule and Florida law.
Get a second set of eyes on the FDD
Gross Law Group, P.A. reviews FDDs and franchise agreements for prospective franchisees, including Item 19. See our FDD review page for the flat-fee options, learn more about our franchise law practice, or read our Florida franchise law guide.
About the author
Keith L. Gross, Esq. is the founding attorney of Gross Law Group, P.A. His practice focuses on franchise law and trademarks for franchisors and franchisees. Before law school he built several businesses. He is admitted to practice in Florida.
Disclaimer: This article is general information about the law as of the review date above. It is not legal advice and does not create an attorney-client relationship. The right answer depends on your specific facts and documents. Consult a licensed attorney before signing a franchise agreement or acting on information in an FDD. See our full disclaimer.