2024 AFDR Data - What Franchises Include in Item 19

Franchise Update Media has been researching franchise lead generation and franchisee recruitment processes for more than a decade. An annual in-depth online survey queries franchise development professionals about a number of issues related to their lead generation and recruitment strategies.

All the responses are collected, aggregated, and analyzed to produce a detailed look into the recruitment and development practices, budgets, spending allocations, and strategies of a wide cross-section of franchisors. The results are presented each year in the Annual Franchise Development Report (AFDR), which can be ordered online at afdr.franchiseupdate.com. 

The 2024 AFDR report is a valuable resource that can provide crucial insights on franchise development lead generation and recruitment best practices. It’s the kind of information that can help brands assess what they are doing right, and what needs improvement.

This is part of a series of articles that will draw out a few important insights from this year’s AFDR in upcoming issues of the Franchise Leadership & Development Report. It’s hopefully the kind of information that can give you an edge in your lead generation and recruitment efforts.

For perspective, this year’s study surveyed 120 brands. The franchisors had 2,533 company-owned units and 24,101 franchise units. The brands represented a variety of segments, including food, retail food, nonfood retail, brick-and-mortar service, and service based on population and territory.

Including a Financial Performance Representation

One of the most popular and viewed sections of a Franchise Disclosure Document (FDD) is Item 19, which is an estimate of a franchise's potential financial performance based on reasonable assumptions. This comes in the form of a Financial Performance Representation (FPR) that states a specific level or range of actual or potential sales, income, gross profits, or net profits. Although Item 19 only requires a prescribed statement from the franchisor, including a FPR is a helpful way to provide prospective franchisees with an idea of the sales, income or profits they can expect to achieve after joining the franchise system.

A vast majority of respondents to the AFDR – 86 percent – said they do provide FPRs in their FDD. The type of information franchisors included in their Item 19 was a bit more varied. Nearly every franchise (94 percent) said they included revenue in that section of the FDD. Fifty-six percent shared expenses and 53 percent disclosed profitability. Thirty-two percent of the respondents said they included an entire P&L statement.

Changes to Item 19

When asked at the time of the survey if they have modified their franchise program to reduce franchisee start-up costs over the previous 12 months, 77 percent of the respondents said they did not.

Among the 23 percent of franchises who had modified an item over the past year, there were several different responses. New build-out options topped the list with 88 percent of the responses. That was followed by 62 percent who added information about investment amount. Nineteen percent added a royalty and 12 percent included a franchise fee.