When it comes to selling franchises, few tools are as powerful as Item 19 of the Franchise Disclosure Document (FDD). But while this section often gets the spotlight, what fuels its strength is something far less flashy: consistent, high-quality franchisee bookkeeping.
What Is Item 19 and Why It Matters
Item 19—officially the Financial Performance Representation—allows franchisors to legally share financial performance data from their existing franchise system. For potential franchisees, this is a critical trust-builder and one of the most valuable parts of the FDD. It helps them understand earning potential, cost structures, and the overall health of the franchise system.
But there’s a catch: the quality of Item 19 hinges entirely on the quality and consistency of the underlying financial data. This is where foundational accounting practices come into play.
The Hidden Power of a Standardized Chart of Accounts
A standardized chart of accounts (COA) is the first domino in establishing financial clarity. When every franchise location uses the same account structure, it becomes incredibly easy to benchmark performance across the system. You can instantly see if one unit’s labor rate is 35% when the brand average is 30%, that’s an actionable insight. Marketing spend, rent, and other KPIs can be compared apples-to-apples.
For franchisors, this means faster, clearer insights into their system’s performance. For franchisees, it means transparent data that informs smarter decisions by comparing performance to top performers. And for Item 19, it means credible, defensible numbers.
Why Real-Time Bookkeeping Matters
Too many franchisees fall into the trap of waiting until year-end to do their books. The result? A year spent flying blind, and a mad dash to piece together financials when tax and disclosure seasons come around.
Solid accounting means doing the work consistently throughout the year. This enables real-time course correction and ensures that by the time FDD season rolls around, you’re not scrambling—you’re presenting confidently.
Beyond compliance, real-time financial visibility also creates opportunities for collaboration and growth within the franchise system. As Top 2 Bottom Business Solutions CEO, Christopher Mallery, puts it: “When everyone can see the numbers, it naturally leads to better conversations, smarter decisions, and a bit of friendly competition. The franchisees who lean into that—especially through mastermind groups—tend to grow faster and stronger.”
Clean Books = Stronger Item 19 Data
Accurate, standardized financials prevent ambiguity. No more wondering whether a cost was owner’s discretionary spending or a true operational expense. No more questioning if marketing dollars were actually spent.
This clarity not only boosts the credibility of the FDD, but also builds trust with prospective franchisees. When data is clean and consistent, buyers feel more confident—and confidence drives conversions.
Looking Ahead: Potential Changes to Item 19
There’s industry chatter about possible regulatory changes that could standardize how Item 19 data is reported. If that happens, franchisors who already have solid accounting systems in place will be miles ahead.
Even if no changes come, those with clean books and a standardized COA will continue to outshine the competition in transparency and professionalism. Prospective franchisees are savvier than ever, and they’re comparing brands not just on branding or support—but on clarity of financial expectations.
Bottom Line: Accounting as a Growth Strategy
Good accounting isn’t just compliance—it’s a growth strategy. It empowers franchisors to produce stronger Item 19s, support franchisees with better benchmarking, and ultimately close more deals.
If you’re looking to scale with confidence, start with your franchisees’ books. And if you’re curious how standardized accounting for your franchisees could improve your FDD or your sales funnel, we’re here to help. Start a conversation with Top 2 Bottom Business Solutions here.
