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FDD Item 20 Guide: Outlets, Franchisee Turnover & Who to Call

Item 20 is where the system footprint and turnover story become visible enough to investigate.

Last reviewed: May 26, 2026 by the BizLeaseCheck Editorial Team

General information, not legal advice.

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Overview

Item 20 covers outlets and franchisee information. It is one of the most valuable diligence sections because it can show openings, closings, transfers, terminations, non-renewals, reacquisitions, and lists of current and former franchisees.

Numbers alone rarely answer the question. Use the tables to decide who to call and what to ask.

Topics to check

Item 20 shows outlet movementHigh confidence

Section 436.5 includes Item 20 for outlets and franchisee information. The disclosure format gives buyers a structured way to inspect system growth, shrinkage, ownership changes, and franchisee contact information.

Read the trend, not just the current count. A system can grow while also showing high churn if new sales mask closures and transfers.

16 CFR 436.5 — Item 20
Call current and former franchiseesHigh confidence

The FTC consumer guidance encourages prospective buyers to contact franchisees. Current franchisees can discuss operations, support, costs, and ramp. Former franchisees can explain why they left and whether the exit was voluntary.

Prepare a consistent question list covering actual startup costs, working capital, supplier costs, local marketing, franchisor support, renewal, transfer, disputes, and whether Item 19 matched reality.

FTC Consumer Guide to Buying a Franchise
Interpret transfers carefullyHigh confidence

Transfers can mean healthy resale activity, distressed exits, refranchising, estate planning, or ownership restructuring. The table alone may not identify the reason.

Ask whether transferred units sold for healthy multiples, whether sellers were under default pressure, and whether the franchisor or insiders were involved.

16 CFR 436.5 — disclosure items
Turnover should connect to economicsHigh confidence

If Item 20 shows closures, terminations, or non-renewals, compare that information with Item 7 startup investment, Item 19 performance data, Item 6 fees, Item 12 territory, and Item 17 termination terms.

High churn is not automatically proof of a bad franchise, but it is a serious diligence signal that needs franchisee calls and professional review.

FTC Franchise Rule Compliance Guide

Key takeaways

  • Item 20 is the outlet and franchisee-information section.
  • Trend lines matter more than a single outlet count.
  • Call both current and former franchisees.
  • Transfers need context before you treat them as positive or negative.
  • Turnover should be compared with Item 6, Item 7, Item 12, Item 17, and Item 19.

Official resources

FTC Franchise Rule landing page 16 CFR Part 436 — Franchise Rule FTC Franchise Rule Compliance Guide FTC Consumer Guide to Buying a Franchise 16 CFR 436.5 — Item 20

Legal-review notes

Guide confidence marker: High confidence.

  • This guide does not characterize any specific franchisor turnover table; apply the framework to the actual FDD.
  • Claims about whether churn is high or abnormal require system-specific benchmarking and professional review.

Frequently asked questions

Why should I call former franchisees?

Former franchisees can explain closure, transfer, termination, non-renewal, support, economics, and exit issues that current operators may be less willing to discuss.

Is rapid outlet growth always good?

No. Growth can be positive, but compare openings with closures, transfers, support capacity, franchisor financials, and franchisee economics.

What does a transfer mean in Item 20?

It depends. A transfer can reflect a healthy resale or a stressed exit. Ask sellers, buyers, and the franchisor for context.