FDD Item 20: How Many Owners Stay (and Leave)

Item 20 is one of the most powerful sections in the FDD, because it is hard numbers instead of marketing. It counts how many locations the franchise has, how many opened, how many changed hands, and how many closed or were terminated over the last few years.

Even better, it gives you contact information for current franchisees, and in many cases former ones too. That means Item 20 is not just data, it is a list of real people you can call and ask the question that matters most: would you do this again?

What FDD Item 20 actually tells you

Item 20 lays out the system in tables: how many franchised and company-owned locations exist, and the year-by-year flow of openings, transfers, terminations, non-renewals, and closures. Behind every one of those numbers is a real person who opened a business, and in the case of closures and terminations, one who did not make it.

It also includes a list of franchisees with contact details, plus the contact information for franchisees who have left the system in the past year. That second list is gold, because those are the people with the least reason to sugarcoat the experience.

How to read Item 20

Look at the multi-year trend, not just the total. Is the number of open locations growing steadily, sitting flat, or shrinking? Then look at the churn underneath it. A brand can show growth in total units while quietly terminating or closing a lot of them, which is a very different story than clean, steady expansion. Add up the closures and terminations and compare them to the openings.

These numbers are the real counterweight to the word 'proven.' A genuinely strong system has owners who stay, renew, and expand. Lots of closures and terminations tell you something the sales pitch will not. So use the contact lists, and make a point of calling former franchisees, not just the happy references the franchisor hands you. Ask them plainly why they left and whether they would do it again.

Three questions to ask

Red flags

None of these is automatically a deal-breaker. They are just patterns worth slowing down for and asking about.

• A steady stream of closures or terminations hiding underneath headline growth.
• Lots of transfers, which can mean owners are quietly trying to get out.
• Total units shrinking year over year.
• Reluctance to share the former-franchisee contact list, or pressure to call only chosen references.

Franchise vs. going independent

Item 20 is a kind of report card an independent business never gets. You can see, in numbers, how many people tried this exact thing and how many are still standing. That visibility is a real advantage of franchising. The flip side is sobering: those closure and termination counts are real owners who brought their own capital, time, and effort, just like you would, and still did not make it. Read it with respect for what it is telling you.

Where to go next

Item 20 is the system's track record. Item 19 covers what those locations earn, Item 3 covers disputes with owners who left unhappy, and Item 17 explains the exit terms behind every transfer and termination.