A recent email lands in an inbox with two figures bold enough to stop a scroll: average gross sales north of $2.8 million, average EBITDA near $800,000. For anyone weighing a seven-figure investment in a franchise, numbers like that read like a potentially great opportunity. They are the kind of figures a marketing team builds an entire campaign around, and at first glance, they suggest a business model that could provide the ROI you’ve been looking for.
Then comes the asterisk. Small, easy to skim past, tucked beneath each number in a font size that seems to shrink every time another zero gets added to the claim above it. That single character now carries more legal and practical weight than almost anything else on the page, and increasingly, it does more work than the number it is attached to.
This is not a story about one brand. It is a story about a pattern showing up across franchise marketing with growing frequency: earnings claims built to impress at first glance, and footnotes built to survive legal scrutiny. Learning to read that gap is one of the more valuable skills a potential franchisee can develop before signing anything.
The Numbers That Catch Every Eye
An email like this usually arrives with clean design, a confident headline, and two numbers doing all the persuading. In the example that prompted this piece, the pitch centered on roughly $2.8 million in average gross sales per location and close to $800,000 in average EBITDA. Presented side by side, the message practically writes itself: strong revenue, strong margins, a business that performs.
For someone in the early stages of researching franchise opportunities, numbers at that scale can feel like validation before a single conversation with the franchisor even happens. They suggest scale, demand, and a proven system. What they do not do, on their own, is tell the reader who actually earned them, or how many locations came anywhere close.
What the Asterisk Revealed
Beneath five email sections at the very bottom, a footnote explains where the numbers* came from. The disclosure pointed back to Item 19 of the franchisor’s FDD and clarified that the figures reflected only the system’s top-performing franchisees, specifically those that had been open for more than roughly four and a half years. It closed with a familiar line: individual results may vary.
That single sentence changes the entire meaning of the pitch. A number built from a brand’s most established, most successful operators is not a preview of what an average franchise location or new franchisee should expect in year one, or even year three. It is a snapshot of what is possible at the high end of the system after years of build-out, brand recognition, and operational refinement, and treating it as a typical outcome is where a lot of franchise math goes wrong.
Understanding Item 19 and Financial Performance Representations
Item 19 exists inside every Franchise Disclosure Document as the section where a franchisor may choose to share financial performance information about its franchisees. The Federal Trade Commission’s Franchise Rule does not require a franchisor to include one at all. Many choose not to, precisely because getting it wrong, or making a claim outside of it, carries legal risk. When a franchisor does include an Item 19, the format, the definitions, and the scope of who is included are largely up to them, within FTC guidelines.
That flexibility is exactly why two franchises can both publish an Item 19 and still hand a prospective owner completely different pictures of reality. One might report systemwide averages across every open location. Another might report the same but highlight a subset, filtered by tenure, geography, or performance tier, and still call it representative. Nothing about that is necessarily improper. It simply means the burden falls on the reader to notice which version they are looking at.
Average Doesn’t Always Mean Typical
Buried inside that flexibility is a distinction worth sitting with: average and typical are not the same thing. If a system includes a wide range of outcomes, from struggling first-year locations to standout veterans, an average pulled from only the top tier will always look far more impressive than what a brand-new owner should realistically expect to see in their own early years.
Gross sales and EBITDA add another layer of complexity. Gross sales measure revenue coming in the door, before rent, payroll, royalties, supplies, and debt service take their share. EBITDA strips out interest, taxes, depreciation, and amortization, which can make a location look profitable on paper well before an owner sees anything resembling take-home income. Neither number is dishonest by itself. Both require context that a headline rarely provides.
How a Big Number Gets Built
None of this requires anything close to fabrication. A franchisor can build an impressive Item 19 figure using entirely accurate data, simply by choosing carefully which data to feature. Restricting the pool to locations open more than four or five years quietly removes every franchisee still in the difficult early ramp-up period, when most new businesses post their weakest results. Focusing on a top-performing cohort, rather than the full system, removes the underperformers and closures that would pull the average down.
Reporting gross sales and EBITDA instead of net profit keeps the numbers larger and the deductions less visible. None of these choices require a franchisor to say anything false. They only require choosing which true thing to put in the headline, and which true thing to leave for the footnote.
The Weight of the Investment
Numbers like these do not exist in a vacuum. For this concept, the estimated initial investment runs from roughly $2.4 million on the low end to just under $4 million on the high end, a range disclosed in the same document that carries the earnings claim. That is not a business most people build with cash alone. Financing a meaningful share of it means debt service becomes a fixed obligation long before EBITDA ever reaches an owner’s pocket.
EBITDA, by definition, excludes interest, the cost of borrowing itself, which is why it stands for earnings before interest, taxes, depreciation, and amortization. Principal repayment, the portion of a loan payment that actually retires the debt, never enters the earnings picture at all, since it is not an operating expense, it is a balance sheet transaction. That distinction matters more than it sounds like it should. Getting from EBITDA to real cash in an owner’s pocket requires subtracting the full loan payment, both interest and principal, even though only one of those pieces ever touched the EBITDA figure to begin with. A location can report a healthy EBITDA number and still leave its owner with little or nothing left over, depending on how the investment was financed and how long the loan runs.
Reading the Cohort Data Instead of the Headline
That gap becomes easier to see when the same disclosure is broken out by how long each location has been open, rather than filtered down to a single average. Presented this way, the numbers form less of a snapshot and more of a timeline.
| Time in Operation | Gross Revenue (Median) | EBITDA (Median) | EBITDA Margin |
|---|---|---|---|
| Roughly 1 year | About $1.1 million | About negative $80,000 | -8% |
| Roughly 2 years | About $950,000 | About $75,000 | 8% |
| Nearly 3 years | About $1.25 million | About $165,000 | 13% |
| Nearly 4 years | About $2.35 million | About $660,000 | 28% |
| Nearly 7 years | About $2.85 million | About $755,000 | 27% |
Viewed this way, the marketed figures from the original pitch sit close to where the longest-tenured cohort’s median lands, not where a new franchisee should expect to be in year one, or year two, or arguably year three. A median first-year location posts negative EBITDA before a single dollar of debt service gets subtracted, and even the EBITDA it does report leaves the principal portion of any loan payment completely unaccounted for. It typically takes several years of operation, and a revenue base roughly double what a new location often generates, before EBITDA reaches a level where a full debt service payment, principal included, and a real owner draw can both be paid.
None of that makes the concept a bad investment. Businesses commonly lose money early and strengthen with time, and a five-stage climb from a rough first year to a strong seventh year is not an unusual shape for a capital-intensive, real-estate-driven business. What it does mean is that the marketed average and a new owner’s early reality are two very different numbers.
Questions Every Potential Franchisee Should Ask
A big number in a marketing email is not a reason to walk away from an opportunity, and it is not a reason to sign one either. It is a reason to ask better questions before either happens. Before treating any earnings claim as a realistic projection, it is worth asking the franchisor, and independently verifying with existing franchisees, at least the following:
- How many locations are actually included in this figure, out of how many total in the system?
- Does the number reflect all franchisees, or a specific subset filtered by tenure, performance, or region?
- Is this an average, a median, or a range, and how far does the range spread?
- Does the figure represent gross sales, EBITDA, or net profit after debt service and owner draw?
- What does Item 20 show about franchisee turnover, closures, and transfers across the system?
- Are the transfers and closures included in those averages?
- What does debt service look like at this investment level, and what is the projected debt service coverage ratio at each stage of the cohort trajectory?
A franchise attorney can walk through the full FDD line by line, and talking with franchisees who were not hand-picked by the franchisor tends to surface a far more grounded picture than any promotional email will.
The Fine Print Isn’t Going Away
The asterisk in franchise marketing did not start as a legal weapon. It started as a small, reasonable acknowledgment that results vary from owner to owner, which they genuinely do. Somewhere along the way, as competition for franchisees intensified and headline numbers grew bolder, that footnote took on a much bigger job: quietly doing the work of accuracy that the number above it was never built to do.
That is unlikely to change anytime soon, and it does not need to. Bold marketing and honest disclosure can coexist inside the same document. What changes the outcome for a potential franchisee is refusing to stop reading at the dollar sign. The number earns attention. The asterisk earns understanding, and understanding is what actually protects an investment.
