Franchise FDD Item 19: Financial Performance Representations

Item 19 of the FDD provides information about the financial performance of the franchise system, including historical or projected financial data. This item is crucial for potential franchisees as it offers insights into the potential earnings and financial aspects of operating a franchise.

Here are the key components typically found in Item 19:

19.1 Financial Performance Representations:

• Representation Types: The types of financial performance representations provided, which may include historical financial data, projected financial data, or both.

19.2 Historical Performance Data:

• Historical Financial Information: If included, historical financial data that provides an overview of the actual financial performance of existing franchise units. This may include information on sales, expenses, and profits.

19.3 Assumptions and Variables:

• Assumptions for Projections: If projections are provided, any assumptions or variables used in preparing the financial projections, such as market conditions, location-specific factors, or other relevant considerations.

19.4 Gross Sales or Revenue:

• Gross Sales or Revenue Information: Details about the gross sales or revenue figures for the franchise system, which may be broken down by location or other relevant factors.

19.5 Expenses and Profits:

• Operating Expenses and Profits: Information about operating expenses and profits, giving potential franchisees a sense of the overall financial picture of franchise units.

19.6 Comparative Information:

• Comparative Information: In some cases, the FDD may include a table comparing the financial performance representations with those of other franchise systems within the same industry.

19.7 Number of Units Represented:

• Units Represented: The number of franchise units that are represented in the financial performance data, giving context to the scale of the information provided.

19.8 Time Period Covered:

• Time Period Covered: The specific time period covered by the financial performance data, whether it is historical information or projections.

Purpose:

The purpose of Item 19 is to provide potential franchisees with a clearer understanding of the financial performance of the franchise system. This transparency helps franchisees assess the potential profitability and financial viability of investing in the franchise.

Tips for Potential Franchisees:

• Carefully Review Representations: Carefully review any financial performance representations provided, whether historical or projected.
• Understand Assumptions: If projections are included, understand the assumptions and variables used in preparing the financial projections.
• Consider Location-Specific Factors: Consider whether location-specific factors, such as demographics or market conditions, are taken into account in the financial performance data.
• Inquire About Comparative Information: If available, inquire about how the financial performance data compares with other franchise systems in the same industry.

By thoroughly examining Item 19, potential franchisees can gain insights into the financial performance of the franchise system and make more informed decisions about the potential return on investment and overall financial viability of the business. It is important for franchisees to critically assess the provided data and seek professional advice if needed to understand the implications for their specific situation.

LINK TO FRANCHISE DISCLOSURE DOCUMENT (FDD) ITEMS WITH BRIEF EXPLANATIONS ON FranchiseFDD.com

1. Item 1: The Franchisor and Its Predecessors, Affiliates, and Certain Employees
2. Item 2: Business Experience
3. Item 3: Litigation
4. Item 4: Bankruptcy
5. Item 5: Initial Franchise Fee
6. Item 6: Other Fees
7. Item 7: Estimated Initial Investment
8. Item 8: Restrictions on Sources of Products and Services
9. Item 9: Franchisee’s Obligations
10. Item 10: Financing
11. Item 11: Franchisor’s Assistance, Advertising, Computer Systems, and Training
12. Item 12: Territory
13. Item 13: Trademarks
14. Item 14: Patents, Copyrights, and Proprietary Information
15. Item 15: Obligation to Participate in the Actual Operation of the Franchise Business
16. Item 16: Restrictions on What the Franchisee May Sell
17. Item 17: Renewal, Termination, Transfer, and Dispute Resolution
18. Item 18: Public Figures
19. Item 19: Financial Performance Representations
20. Item 20: Outlets and Franchisee Information
21. Item 21: Financial Statements
22. Item 22: Contracts
23. Item 23: Receipts

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