Item 19 Earnings Claims in Pet Franchise FDDs: How to Read Performance Disclosures
Top TLDR: Item 19 earnings claims in pet franchise FDDs are the optional financial performance representations a franchisor may publish in the Franchise Disclosure Document. When present, Item 19 shows average or median unit revenue, sometimes gross profit, and occasionally net figures, drawn from a defined sample of operating units over a defined period. Read Item 19 alongside Item 20 franchisee calls and never as the only data point.
If you've read a Franchise Disclosure Document for any pet franchise, you've probably flipped to Item 19 first. The earnings disclosure is the closest thing to a published track record a franchise opportunity offers. It's also one of the most misread sections of the entire document. Buyers tend to treat the headline average as a forecast for their own future location, when the actual numbers are doing something more limited.
This walkthrough covers what Item 19 earnings claims in pet franchise FDDs actually disclose, why some franchisors include them and others don't, and how to read the disclosure critically before committing to a franchise investment.
What Item 19 Actually Is
Item 19 is the section of the Franchise Disclosure Document where a franchisor may, but is not required to, present financial performance representations about its operating units. The FTC franchise rule allows franchisors to publish revenue, expense, profit, or other financial data, provided the data is presented honestly and with the disclosures the rule requires.
If a franchisor includes an Item 19, three things must be present: a reasonable basis for the claim, the material assumptions and characteristics of the underlying data, and a written substantiation available to prospective buyers on request. If a franchisor doesn't include an Item 19, no franchisor or representative may make any earnings claim verbally or in marketing materials. Discussion of revenue, profit, or unit performance becomes restricted to what the franchisor's existing franchisees say in their own conversations with you.
The plain-language walkthrough of the Franchise Disclosure Document explains where Item 19 sits in the larger document and how it relates to the other 22 items.
Why Some Pet Franchisors Don't Include an Item 19
Roughly 60 to 70 percent of franchisors across all categories include an Item 19. The remainder choose not to, for several reasons:
Limited operating history. A franchisor with fewer than 10 to 15 operating units often doesn't have a large enough sample to publish meaningful averages. Disclosing performance from three units would set expectations the franchisor can't reliably support.
High variance between units. Some categories have wide variation in unit performance based on local market factors. A franchisor with a 5x range between top and bottom performers may decide the average misleads more than informs.
Strategic positioning. Some franchisors prefer prospective buyers to evaluate the opportunity through Item 20 franchisee conversations rather than through published averages. This isn't necessarily a red flag, but it does shift more research burden onto the buyer.
Litigation risk. Item 19 representations carry liability if the underlying data is later challenged. Some franchisors decide the legal exposure isn't worth the marketing benefit.
The absence of an Item 19 is information, not necessarily a problem. A franchisor that doesn't publish one should be able to explain the reason clearly. The validation walkthrough for franchise opportunities covers how to evaluate an opportunity when Item 19 isn't available.
Types of Financial Performance Representations
When an Item 19 is present, the data falls into several categories:
Gross revenue or sales. The most common disclosure type. Shows total dollars coming in the door before any expenses. This is the easiest figure to substantiate, since it pulls directly from royalty reporting.
Adjusted gross sales. A definition specific to the franchisor's royalty calculation. Often excludes specific items (sales tax, certain refunds, sometimes online or wholesale revenue). Read the definition carefully because adjusted gross sales is what Wagbar and most pet franchisors actually base royalty on, not gross revenue.
Cost of goods sold or specific expense categories. Less common in pet franchises but sometimes included for categories with significant inventory costs (retail, supplies).
Gross profit. Revenue minus cost of goods. Useful for category benchmarking but masks operating expenses.
Net profit or operating income. Rare. When present, it's usually labeled as "before owner compensation" or "before debt service," which materially changes how you read it.
Membership counts, transaction volumes, or unit-level operational metrics. Some franchisors include these alongside revenue figures. Useful for understanding how the headline number is built.
The pet franchise investment numbers walkthrough covers what the typical revenue and cost structure looks like for pet franchise categories.
How to Read an Item 19 Average Critically
A typical Item 19 disclosure for a mid-sized franchisor might read something like: "Among the 47 franchised locations open for at least 24 months as of December 31, 2024, the average gross revenue was $X. Of those 47 locations, 18 (38 percent) achieved or exceeded the average."
Three things to extract from a statement like that:
Sample composition. "47 locations open for at least 24 months." This excludes newer locations and any that closed. Newer locations typically run below the mature average, so excluding them shifts the headline upward. Closed units are also excluded, which omits the lower tail of the distribution.
Time period. "December 31, 2024." Trailing 12-month data is most common. Confirm the year is recent. Stale data (more than 24 months old) is a flag.
Percentage achieving the average. "18 of 47 (38 percent) achieved or exceeded the average." This is the single most important number in the disclosure. If only 38 percent of units hit the average, then 62 percent fell below it. The average is being pulled up by top performers, and a buyer projecting their own performance against the average is implicitly betting they'll be in the top third.
The Item 7 initial investment walkthrough covers how to pair Item 19 averages with Item 7 investment ranges to model realistic ROI scenarios.
Median vs. Mean: Why the Distinction Matters
The "average" published in most Item 19 disclosures is the mean: the sum of all unit revenues divided by the unit count. The mean is sensitive to outliers. A handful of high-performing units can pull the mean significantly above what most units actually achieve.
The median is the middle value when units are sorted. Half the units perform above the median and half perform below. For most franchise systems, the median is lower than the mean, often by 10 to 25 percent.
If a franchisor publishes only the mean, ask for the median. If the franchisor publishes both, the median is the better number for projecting your own expected performance. If the franchisor declines to share the median, treat that as data about how confident the franchisor is in the underlying distribution.
Quartile breakdowns are even more useful when available. A disclosure that shows top quartile, median, and bottom quartile gives buyers a real picture of unit-level variation. The FDD Item 21 financial statements walkthrough covers how to read franchisor-level financials alongside unit-level Item 19 data.
Sample Size and Time Frame
Two structural factors affect how meaningful any Item 19 average is:
Sample size. A 47-unit sample produces more reliable averages than a 12-unit sample. As a rough heuristic, fewer than 20 units in the Item 19 sample means the average is heavily influenced by individual unit outcomes. Treat single-digit samples as informational only, not predictive.
Time frame. "At least 24 months open" is the most common cutoff. Some franchisors use 12 months (which captures less mature units and usually lowers the average). Some use 36 months or longer (which excludes newer units and usually raises the average).
For a buyer planning a new opening, the relevant question isn't what 36-month-old units earn. It's what your own location is likely to earn at 12 months, 24 months, and 36 months. Item 19 averages don't directly answer that question. Most buyers triangulate from Item 19 plus franchisee conversations plus their own local market analysis. The breaking-even timeline for dog bar franchise profitability covers what realistic ramp tends to look like in the first 24 months.
What's NOT in Item 19 (And Why That Matters)
Item 19 is more limited than buyers often assume. The disclosure typically does not include:
Owner compensation. A unit grossing $X with $Y in operating expenses might leave $Z for the owner, but if Item 19 only discloses gross revenue, the owner-take number is invisible. Net figures, when included, are usually labeled "before owner compensation," which means the owner's salary is being absorbed into the profit line.
Debt service. Loan payments on financing are operational realities for most franchisees but rarely show up in Item 19. A unit showing healthy net profit before debt service may still leave the owner with little after a $700,000 SBA loan payment.
Local market variation. Item 19 is system-wide. Your specific market's demographics, competition, and real estate costs aren't reflected. Two units with identical Item 19 averages can have very different economic outcomes.
Failed or closed units. Most Item 19 disclosures exclude closed units. The dropout rate over time is in Item 20, not Item 19, and it's worth pulling forward.
Personal owner factors. Owner-operator units typically out-earn semi-absentee units. If the Item 19 sample mixes both, the average obscures this.
The dog bar franchise cost breakdown covers how to layer ownership-model assumptions onto Item 19 averages.
Cross-Checking Item 19 With Item 20 Conversations
The most reliable way to read Item 19 is to validate it against direct conversations with franchisees from Item 20. The questions worth asking on those calls:
Does the Item 19 average match what you actually saw in your first 12 and 24 months?
What's the variance between top and bottom-performing units in the system?
What drives the variance?
Where did your unit fall relative to the published average?
What did the franchisor not disclose in Item 19 that materially affects your real economics?
If you could publish your own Item 19 representation for your unit alone, what would it say versus what the franchisor publishes for the system?
Franchisees who've operated for 24+ months are the best source for these answers. Item 20 of the FDD lists current and former franchisees with contact information. The 10 questions to ask current franchisees page covers the broader list of questions worth working into the conversation.
Wagbar's Approach to Item 19
Wagbar's FDD follows the structure required by the FTC franchise rule, including the 23 standardized items. Whether and how Item 19 is presented in any specific FDD edition is a question the Wagbar franchise development team answers directly when prospective buyers reach the FDD review stage.
What Wagbar can speak to consistently is the underlying economics that any Item 19 representation would reflect. The franchise economics include a $50,000 franchise fee, 6 percent royalty on adjusted gross sales, 1 percent marketing fund contribution, and a 50 percent franchise fee discount for buyers committing to three or more locations. Estimated total initial investment runs $470,300 to $1,145,900, an estimate required by the FTC franchise rule that is not a guarantee of profitability or earnings. Existing franchisees, including AJ Sanborn in Richmond, Dianna in Phoenix, Jennifer in Los Angeles, Liz and Shelby in Knoxville, Brandi and Denise in Charlotte, and Matt and Taylor in Myrtle Beach, are the right source for specific questions about real-world unit performance, and their backgrounds are covered in the Wagbar franchise owner profiles.
Frequently Asked Questions About Item 19 Earnings Claims
Is Item 19 required to be in every Franchise Disclosure Document?
No. Item 19 is the only optional item in the FDD. Roughly 60 to 70 percent of franchisors include one. If a franchisor doesn't include Item 19, no representative may make any earnings claim verbally or in marketing materials, and your only source of unit performance information becomes Item 20 franchisee conversations.
Can I trust the numbers in Item 19?
Item 19 representations must have a reasonable basis and must be substantiated on request. Most franchisors are honest in their Item 19 disclosures because the legal liability for misleading representations is significant. The harder question isn't whether the numbers are honest; it's whether they predict your specific future. They usually don't, directly. Validating with Item 20 conversations and your local market analysis matters more than trusting the headline number.
What if the franchisor's verbal claims don't match Item 19?
This is a flag worth raising. The FTC franchise rule prohibits earnings claims outside the Item 19 disclosure. If a development representative tells you "most franchisees earn $X" and that figure isn't in Item 19, the representative is likely violating the rule. Document the conversation and ask for the claim in writing. Working with a franchise attorney to review the FDD helps catch inconsistencies between verbal and written claims.
What's a healthy Item 19 sample size for a pet franchise?
20 or more units in the sample produces reasonably reliable averages. 50 or more starts to look statistically meaningful. Fewer than 10 means the average is essentially anecdotal. For a young pet franchise, expect smaller sample sizes; that's not necessarily a problem, but it does shift more weight onto franchisee conversations.
Should I project my own revenue using the Item 19 average?
Cautiously. Most buyers project low end, mid range, and high end scenarios using Item 19 quartiles or percentile breakdowns when available, plus their own assumptions about local market factors. Projecting a single number based on the system average usually leads to financial planning errors when actual ramp is slower than the average suggests.
How does Item 19 relate to Item 7 and Item 21?
Item 7 shows the estimated investment to open. Item 19 shows operating performance once open. Item 21 shows the franchisor's own financial health. A complete financial picture pulls from all three. A buyer reading only Item 19 may be impressed by unit performance while missing red flags about franchisor solvency in Item 21.
What if Item 19 looks great but franchisees tell me a different story?
Trust the franchisees. Item 19 averages are what they are, but franchisee on-the-ground perspective on unit economics, owner workload, and franchisor support is more predictive of your future experience. If franchisee conversations contradict Item 19, ask both sides about the discrepancy and watch how each responds.
Bottom TLDR
Item 19 earnings claims in pet franchise FDDs are useful for setting expectations but limited as a forecasting tool. Averages obscure unit-level variation, sample size matters more than headline figures, and the absence of an Item 19 is itself information. Always cross-check the disclosure with conversations with current franchisees from Item 20 before committing to any pet franchise investment.
