FDD Item 20 Explained: Turnover Tables That Tell the Truth

Most people who read an FDD spend their attention on Item 19, because Item 19 is where a franchisor is allowed to talk about money. Item 20 gets skimmed because it’s five tables of numbers with no narrative attached to them. That’s backwards. Item 19 is optional and a franchisor can lawfully say nothing there. Item 20 is not optional, and it’s where turnover shows up whether or not anyone wants to talk about it out loud.

It answers a plain question: of the outlets that existed a year ago, how many are still open, and why did the ones that closed actually close. That doesn’t require a law degree. It requires knowing what five tables and a handful of defined terms mean, and doing the arithmetic yourself instead of trusting a sales rep’s summary of it.

We are not a law firm and this is not legal advice. This is a reading guide built from the FTC’s own Franchise Rule compliance materials, plus real examples pulled from public FDD review sources, so you know what you’re looking at before you call your attorney.

Why Item 20 exists, and why it’s not optional

Item 20 falls under 16 CFR 436.5(t), the FTC’s Franchise Rule. Unlike Item 19, there’s no lawful way to skip it. Every franchisor selling in the United States has to disclose the same five tables in the same format, covering the same three fiscal years, which means you can build a habit of reading Table 3 the same way in every FDD you ever open.

The FTC’s own compliance guide describes the point plainly: the tables show the net change, positive or negative, in franchised and company-owned outlets over time, state by state, so a prospective buyer isn’t relying on anyone’s verbal account of how the system is doing. A franchisor with real turnover problems still has to put the number in a numbered table.

The five tables, table by table

Table 1, Systemwide Outlet Summary. This is the roll-up. It shows total franchised outlets and total company-owned outlets at the start and end of each of the last three fiscal years, with the net change for each. It’s the fastest way to see whether a system is growing, flat, or shrinking overall before you dig into the state-by-state detail underneath it.

Table 2, Transfers. This tracks how many outlets changed hands from one franchisee to another, state by state, for each of the last three years. A transfer is a sale between private parties, not the franchisor buying anything back. Transfers happen for ordinary reasons: retirement, a move, an owner cashing out. A transfer alone isn’t a red flag. A system with almost no transfers and heavy terminations instead is telling you something different: owners aren’t finding buyers, they’re being pushed out or walking away.

Table 3, Status of Franchised Outlets. This is the table that carries the real turnover story. State by state, for each of the last three fiscal years, it shows outlets at the start of the year, outlets opened, and then four separate exit categories: terminations, non-renewals, reacquisitions by the franchisor, and outlets that ceased operations for any other reason. It ends with outlets remaining at year’s end. Every number in this table is state-by-state, which lets you check whether a franchisor’s national growth story is hiding a regional problem.

Table 4, Status of Company-Owned Outlets. Same state-by-state, three-year format as Table 3, but for locations the franchisor owns directly. The exit columns differ because the reasons differ: instead of terminations and non-renewals, Table 4 tracks outlets reacquired from franchisees, outlets closed, and outlets sold to franchisees. It’s worth comparing against Table 3. A franchisor that’s quietly converting franchised locations into company-owned ones, or the reverse, shows up here.

Table 5, Projected Openings. This table covers two things: how many signed franchise agreements haven’t resulted in an open outlet yet, by state, and the franchisor’s projected new openings for the next fiscal year, also by state. A large gap between agreements signed and outlets actually opened is worth asking about directly. It can mean normal build-out delays, or it can mean franchisees are stuck in a queue that isn’t moving.

The definitions that make the arithmetic mean something

The FTC’s compliance guide defines each exit category precisely, and the differences matter for how you read a franchisor’s story:

Termination means the franchisor ended the agreement early without paying the franchisee anything or forgiving any debt, typically for a violation of system standards.

Non-renewal means the agreement simply wasn’t renewed when its term expired.

Reacquisition means the franchisor bought the outlet back for cash or other consideration, sometimes at the franchisee’s request.

Ceased operations is the catch-all: the outlet stopped operating for any reason other than the three above, including a franchisee walking away or going inactive.

One instruction from the FTC guide is easy to miss and changes how you read a single unusual number. If an outlet has multiple ownership events in one fiscal year, say a franchisor reacquires it, resells it, and the new owner closes it, only the last event gets reported, with a required footnote explaining the sequence. A single closure can carry a hidden history, and the footnotes are where that history lives.

Calculating a turnover signal yourself, worked in full

There’s no official formula printed anywhere in the FDD for turnover rate. Here’s a common approach: add up a year’s terminations, non-renewals, reacquisitions, and ceased operations, then divide by the number of outlets at the start of that year. Analysts who work with FDD data for a living generally treat rates in the high single digits as ordinary and rates climbing into the double digits, especially two or three years running, as worth a harder look, according to Zors, a firm that builds franchise disclosure analytics tools.

The table below is illustrative. It is not a real franchise system, and the numbers exist only to walk through the arithmetic the way you’d apply it to an actual Table 3.

Year	Outlets at Start	Opened	Exits (all four categories)	Outlets at End
Year 1	200	20	10	210
Year 2	210	15	18	207
Year 3	207	8	30	185

Turnover rate = exits divided by outlets at the start of the year:

• Year 1: 10 divided by 200 equals 5.0 percent
• Year 2: 18 divided by 210 equals 8.6 percent
• Year 3: 30 divided by 207 equals 14.5 percent

That’s the shape of a real red flag: not one bad number, but a rate that climbs three years running while new openings fall at the same time. A single rough year in an otherwise stable system reads very differently than this pattern does.

What real Item 20 tables looked like in the 2025-2026 filing season

Illustrative math is one thing. Actual FDDs filed in the same season can look nothing alike. Pulling from a review of Item 20 data across more than 1,600 FDDs filed in 2025 and 2026, Jersey Mike’s opened 318 units against 5 closures, a 99.8 percent retention rate, and Club Pilates opened 166 units against 4 closures, a 97.6 percent retention rate. Coverall, a commercial cleaning franchise, opened 526 units but closed 446 of them in the same period, netting only 80 new units against a base of 5,588: high gross growth sitting on top of heavy churn. Applebee’s opened zero new franchised units while closing 82, a system in outright contraction.

Separately, Jack in the Box’s own 2026 FDD discloses a net negative franchised unit count for fiscal 2025: 1,985 franchised units at year-end against 2,040 at the start, a decline of 55 units in one year. None of these four systems is disclosing anything unlawful. All of them are disclosing exactly what Item 20 requires. Identical filing seasons produce completely different tables, and only reading the actual table tells you which system you’re looking at.

Red flags, framed carefully

Terminations and non-renewals rising while transfers stay flat. Transfers mean owners found buyers. Terminations and non-renewals climbing while transfers don’t move means owners are leaving without a buyer lined up, or the franchisor is pushing them out.

A one-year spike against a flat trend. Three years of steady, low exit numbers followed by one bad year deserves a direct question to the franchisor about what changed. It might be a one-time event. It might not be.

Confidentiality clauses disclosed in Item 20 itself. The FTC requires a franchisor to disclose if current or former franchisees signed agreements restricting them from speaking openly about their experience to a prospective franchisee like you. If that disclosure applies, the FDD must include this required statement, verbatim, with the brand’s own name filled in: “In some instances, current and former franchisees sign provisions restricting their ability to speak openly about their experience with [name of franchise system]. You may wish to speak with current and former franchisees, but be aware that not all such franchisees will be able to communicate with you.” Some franchisors go further and voluntarily disclose the number and percentage of franchisees under such agreements. If that number is climbing, it’s worth asking why settlements increasingly come with silence attached.

That disclosure is narrower than a related, separate development worth knowing about. In July 2024 the FTC issued a policy statement on non-disparagement, goodwill, and confidentiality clauses in franchise agreements, declaring that clauses barring a franchisee from reporting potential law violations to the government, or threatening retaliation for doing so, are an unfair practice under the FTC Act. That’s policy guidance, not a court ruling. It doesn’t bind the FTC or create new legal rights on its own, so treat it as a signal of how the agency views these clauses, not as an automatic voiding of ones already signed. The Item 20 disclosure is about clauses limiting what a franchisee can tell you. The 2024 statement is about a franchisor trying to stop a franchisee from ever telling a regulator anything. They’re different issues, but both raise the same question: how much is this system trying to control what its own franchisees are allowed to say.

The real payoff: the contact list

Everything above is table-reading. The actual return on Item 20 comes after the tables, where the franchisor must list current franchisees, all of them if the system has fewer than 100, or a minimum of 100 concentrated in your state and nearby states if it’s bigger, plus every former franchisee who left in the most recently completed fiscal year, and anyone the franchisor has lost contact with for ten weeks or more.

That list isn’t a courtesy. It’s the roster you work from to validate what the tables are telling you. Our guide on questions to ask franchisees is built around this exact list, structured so a scripted answer stands out from a real one. Don’t stop at the names a sales rep hands you first. Work the full list, current and former owners both, and weight the former franchisees a little more heavily. They have less reason left to soften an answer.

Where Item 20 fits in the bigger document

Item 20 is one piece of a picture that spans several numbered items. For the full 23-item structure and a reading order that puts the money items first, see our guide to reading an FDD. A franchisor’s litigation history in Item 3 reads best against these same outlet counts, since the Franchise Rule judges what counts as material relative to the size of the system, and the territorial protection promised in Item 12 reads against this same density picture too. And since Item 19’s financial numbers only mean something once you know how many outlets survived long enough to be counted, our breakdown of reading a coffee franchise Item 19 pairs directly with everything covered here.

The honest bottom line

Item 20 won’t tell you why any single franchisee left, and it won’t hand you a verdict on whether a system is safe to join. What it gives you is three years of hard counts, broken down by state and exit type, that exist whether or not anyone wants to talk about them on a sales call. Do the arithmetic on Table 3 yourself instead of accepting someone else’s summary of it, read the footnotes on anything unusual, and treat the confidentiality clause disclosure as a real data point, not boilerplate.

Then use the list at the back of the item. It’s the one part of Item 20 that isn’t a table, and it’s the part that turns everything else into a set of phone calls you can actually make before you sign anything. For the sourcing standard behind every figure in this piece, see our editorial methodology.