Item 19 Financial Performance Representations (FPR) are a key component in any prospective franchisee’s due diligence process. FPRs help them to analyze a franchise investment for the opportunity of a return. They are critical in constructing a pro forma income statement and cash flow projections.
Our research into new franchise growth indicates that those franchisors who include an Item 19 FPR in their FDD have a distinct advantage over their competition.
Item 19 FPR presentations can take many forms. A number of franchise systems are quite transparent, providing complete profit and loss statements. The majority provide a system-wide average and typically present tiers or quartiles and gross revenue. Some presentations even combine franchisor and franchisee locations, while others present the top grossing location in addition to quartiles.
Given the opportunity to present Item 19 data in different ways, there is little reason for a franchisor to withhold the information. In fact, we have found that between social pressures and the increased due diligence efforts of prospective franchisees, it has become clearly disadvantageous for a franchise system to exclude Item 19 FPR data from an FDD.
Contact us for a free consultation to help you find the best franchise investment!
Not sure how much can you afford?
Fill out our Franchise Affordability Calculator
Voyage Franchising
Related Articles
Open Your Own Independent Business or Buy a Franchise?
From the outset, you’ll have some obvious questions you’ll need to ask yourself before you can start formulating your own strategy to begin your venture.
New York Times Investigates Subway’s Abuse of Franchisees
New York Times investigation into the use of questionable practices by one its Franchise Development Agents that culminated in the agent acquiring two of a franchisees Subway stores.
The Fall of A Giant – Are Subway’s Healthiest Days Behind Them?
Not even a decade ago, Subway was the champion of healthy eating. In fact, they were the largest fast food chain in the world.
What Sub-Franchising Really Means
Sub-franchising is frequently confused with other franchise models, including area developers, master franchisors, regional developers.
Maximize Market Penetration and Branding with Multi-Unit Franchisees
Multi-unit franchising grows in popularity, in the Quick Serve Restaurant sector, this model continues to expand into other franchise sectors in popularity.
The Top 10 Franchise Grade Facts & Figures From 2017
Detailed studies on emerging franchise success rates, errors in Item 20 disclosure and sector performance, Franchise Grade’s reports help you.
A Road Block to Franchise Growth is Right Under Your Nose
New franchise growth is the top priority for emerging franchise brands. Many of these franchises have an obstacle on the road to more franchise locations.