FDD Item 20: Your Direct Line to the Truth About Any Franchise

What Is FDD Item 20?

FDD Item 20 is a section of the Franchise Disclosure Document that contains a complete roster of the franchise system. By law, every franchisor must include the name, business address, and telephone number of every franchisee who operated under the brand during the most recent fiscal year.

But Item 20 goes further than just current owners. It also lists franchisees who left the system in the past year, including those who were terminated, chose not to renew, or transferred their business. This second list is just as important as the first, because it tells you about the people who didn't stay.

Item 20 also includes the total number of franchise units at the beginning and end of the year, how many opened, how many closed, and how many changed ownership. These numbers paint a clear picture of system health. Is the brand growing? Are more people joining than leaving? The math is right there.

Why Item 20 Is the Most Valuable Part of the FDD

Financial tables tell you what the franchisor wants you to know. Marketing materials tell you what the franchisor wants you to believe. But Item 20 gives you direct access to the people who can tell you what it's actually like.

Think about it. If you were buying a car, you'd read reviews from actual owners. If you were taking a job, you'd check Glassdoor or talk to current employees. A franchise investment of $300,000 or more deserves at least the same level of research. Item 20 is your Glassdoor for franchises.

The franchisees listed in Item 20 have no obligation to talk to you, but most will. They remember being in your position. They know what it felt like to weigh a major investment decision. And most of them have opinions they're willing to share, both positive and constructive.

A franchisor can spin anything. But a room full of franchisees who are willing to take your call and speak candidly? That's the most reliable signal you'll find in the entire franchise research process.

How to Use Item 20 for Validation Calls

Here's a step-by-step approach to turning Item 20 into actionable intelligence:

Step 1: Build your call list. Don't just call three or four people. Aim for 15 to 20 names from the current franchisee list. Pick a mix of tenured and newer franchisees, different geographic markets, and if the brand has multi-unit operators, include some of those too.

Step 2: Call former franchisees. This is where many buyers skip a critical step. The people who left the system can tell you things that current owners can't or won't. Maybe they had a bad experience. Maybe they sold a profitable business. Either way, their perspective adds context you can't get anywhere else.

Step 3: Prepare your questions. Go in with a written list. Cover financial expectations, franchisor support, training quality, daily operations, and overall satisfaction. Ask open-ended questions that invite honest answers rather than yes-or-no responses.

Step 4: Listen for patterns. One franchisee's bad experience might be an outlier. But if five different people in five different markets all mention the same issue, that's a pattern worth taking seriously. Similarly, if nearly every franchisee you call says they'd invest again, that tells you something meaningful.

Step 5: Ask about the numbers. Ask franchisees whether the Item 7 investment range was accurate for them. Ask about their ramp-up timeline. Ask about any expenses that caught them off guard. These financial reality checks are invaluable.

What to Look for in the Item 20 Data Tables

Beyond the contact list, Item 20 contains data tables that reveal system-level trends. Here's what to examine:

Net unit growth: Compare the number of units at the start and end of the year. A system that's growing is generally a positive sign. A system that's shrinking needs explanation.

Terminations vs. non-renewals vs. transfers: There's a difference. A termination means the franchisor ended the relationship, often for cause. A non-renewal means the franchisee chose not to continue when their agreement expired. A transfer means someone sold their business. Each tells a different story.

A high transfer rate can actually be positive. It means franchisees were able to sell their businesses, which implies the units have value. A high termination rate is more concerning and worth investigating during your validation calls.

Projected openings: Item 20 includes the number of franchise agreements signed but not yet open. This gives you a sense of the brand's pipeline and growth trajectory. A healthy pipeline suggests the brand is still attracting new investors.

Geographic concentration: The contact list shows you where franchisees are located. This can help you understand whether the brand has proven itself in markets similar to yours. If every location is in one region and you're planning to open somewhere very different, that's worth discussing with the franchisor.

Questions to Ask Franchisees from Item 20

The quality of your validation depends on the quality of your questions. Here are the ones that matter most:

About the investment: Did the total investment match what Item 7 estimated? Were there costs that surprised you? How long did it take to reach a comfortable stride?

About support: How would you rate the initial training? Is the ongoing support responsive and useful? Does the franchisor follow through on what they promise during the sales process?

About operations: What does a typical week look like? How many hours do you work? What's the hardest part of running this business? What's the most rewarding?

About satisfaction: Knowing what you know now, would you do this again? Are you planning to open additional locations? Would you recommend this franchise to a friend considering it?

About revenue: Without asking for specific numbers, ask whether the business met their financial expectations. Ask about the recurring revenue model and client retention. In pet services, repeat customers are the backbone of the business, and franchisees can tell you how quickly that base builds.

Strong franchise brands like Zoom Room encourage prospective owners to make these calls. The franchise development team won't steer you away from the phone list because they know their franchisees' candid feedback is one of their strongest selling points. If any brand discourages you from making validation calls, treat that as a significant red flag.