If you’ve never read an FDD before, Item 19 is usually the page people flip to first. It’s also the page most often misread.
This is the numbers half of due diligence. For the people side, actually talking to current owners, see What to Look for in Spray Foam Franchise Reviews. Use both together before you decide anything.
What Item 19 Actually Is
Under the FTC’s Franchise Rule (16 CFR Part 436), every FDD has 23 standardized items. Item 19 is the only one where a franchisor is allowed to make claims about how its locations are actually performing financially.
Here’s the part people miss: making that disclosure is optional. A franchisor can include it, or simply state that they don’t make financial performance representations. Neither choice is automatically a red flag. It just changes where you’ll need to do more homework yourself.
One thing is required, though. If a franchisor does include Item 19, the numbers need a reasonable basis. They have to be substantiated, not just impressive-sounding figures with nothing behind them.
How to Actually Read the Numbers
A few checks are worth running every time you see an Item 19 disclosure.
Average versus median
An average can get pulled upward by a handful of very strong performers. A median shows what the middle of the pack actually looks like. If a disclosure shows only an average, ask why the median isn’t there too.
Which locations are counted
Some disclosures only include mature locations, often those open two years or more. That naturally looks stronger than a system-wide number that includes brand-new outlets still ramping up. Check the footnotes for exactly which locations the figures represent.
What got left out
Item 19 disclosures often exclude certain locations: underperformers, recently closed outlets, company-owned versus franchisee-owned, or specific markets. These exclusions are usually disclosed somewhere, but they’re easy to skim past.
Sample size
A claim built on four locations doesn’t carry the same weight as one built on forty. The FDD should state exactly how many outlets the data comes from.
Revenue versus profit
Some disclosures show Average Unit Volume, or AUV, without subtracting operating costs, royalties, and other expenses. That tells you demand exists. It doesn’t tell you what actually lands in an owner’s pocket. Revenue and profit are two different questions. Know which one you’re reading. For a closer look at what actually drives margin in this category, see Is a Spray Foam Business Profitable? It pairs well with the full cost breakdown when you’re putting the whole picture together.
Questions to Bring to Your Franchise Attorney
This is one of the few parts of franchise due diligence where a professional review genuinely earns its cost. A few questions worth raising:
1. “Does the disclosure show median as well as average? If not, why not?”
2. “How many locations is this data based on, and how many were excluded?”
3. “Is this gross revenue, net profit, or something in between?”
4. “How recent is the data, and how does it compare to the system’s current outlet count?”
If a Franchisor Skips Item 19
Plenty of franchisors choose not to make an Item 19 disclosure, spray foam insulation included. It’s common, not unusual. Performance can vary too much by territory, tenure, and local market to represent fairly in one disclosure.
When that happens, your due diligence just shifts. Lean more on validation calls with current franchisees (our franchise reviews guide has the questions to ask) and on your own research into your specific territory.
This article explains general FDD disclosure practices under the FTC Franchise Rule and is not legal or financial advice. Always review the current Liquid Green FDD and consult a franchise attorney before making an investment decision.
