What is Item 20 of the FDD?

Item 20 is the Outlets and Franchisee Information section of a Franchise Disclosure Document. It reports, in tables, how many outlets opened, closed, were transferred, or were terminated over the franchisor's last three fiscal years, and it lists the names and contact details of current and former franchisees.

How do I tell if a franchise is shrinking?

Compare openings to closures, terminations, and non-renewals in the Item 20 tables across all three years. If a system is losing more units than it adds, or the closure count keeps climbing, it's contracting, regardless of how large it looks. Net unit growth matters more than total size.

What's the difference between a closure and a termination in Item 20?

A closure (ceased operations) usually means the franchisee shut down voluntarily, often because the unit wasn't working. A termination means the franchisor ended the agreement. Both are negative signals, but a high termination count can point to conflict between the franchisor and its owners.

Does Item 20 include franchisee contact information?

Yes. Item 20 requires franchisors to list current franchisees with their outlet address and phone number, plus the contact details of franchisees who left in the most recent year. This is the legal basis for validation calls: you can reach owners the franchisor didn't choose for you.

FDD Item 20 Explained: Outlet Counts, Closures, and Franchisee Contacts

Item 20 is where a franchise can't hide whether it's actually working. While Item 19 earnings are optional and franchisor-framed, Item 20 is required, and it reports cold counts: how many units opened, how many closed, how many were terminated, and how many owners walked away, for each of the last three years. It also hands you the contact list to call those owners yourself. It might be the most useful item in the whole document.

What Item 20 contains

The FTC Franchise Rule requires Item 20 to disclose, in standardized tables, the franchise system's outlet activity over its last three fiscal years. You'll see counts for:

Outlets opened: new units that came online.
Outlets closed (ceased operations): units that shut down, usually voluntarily.
Terminations: agreements the franchisor ended.
Transfers: units that changed owners.
Non-renewals: agreements that lapsed and weren't renewed.

It separates franchised units from company-owned ones, and it gives three years of history rather than a single snapshot. That time series is the whole value: one bad year is noise; three years of decline is a trend.

And then there's the contact list, which we'll get to, because it's the part most buyers underuse.

Reading the tables: growth or decline

Total unit count is a vanity metric. A brand can have 800 locations and be quietly falling apart. What you want is net unit growth: openings minus the units leaving the system.

Run the simple math across all three years:

Openings − (closures + terminations + non-renewals) = net change

If that number is consistently positive, owners are succeeding and new ones keep signing. If it's negative, or trending that way, the system is shrinking, no matter how big it looks today. A 200-unit brand adding 30 net units a year is healthier than a 600-unit brand losing 40.

Watch the direction, too. Closures that climb year over year are worse than a flat closure rate, even if the totals look similar. The trend tells you where things are heading.

Closures vs. terminations

The two negative categories mean different things, and the difference matters.

A closure (ceased operations) usually means the franchisee chose to shut down: the unit wasn't making money, or the owner gave up. It's a signal about unit economics.

A termination means the franchisor pulled the plug on the agreement. A high termination count can point to friction between corporate and its owners, or to franchisees failing to meet standards. Either way, lots of terminations is a relationship problem, not just an economics problem.

Read the categories separately. A brand with high voluntary closures has a profitability problem. A brand with high terminations may have a culture problem. Both are worth understanding before you sign.

The contact list most buyers ignore

Here's the part of Item 20 that pays for the whole read. The Rule requires franchisors to disclose:

Current franchisees: name, outlet address, and business phone.
Former franchisees: the name, city, state, and phone of owners who left in the most recent year.

That former-franchisee list is the closest thing to insider information you'll get legally. The franchisor will steer you toward its happiest owners; Item 20 forces it to also tell you who quit. Those are the calls that surface the real story. How to find and use franchisee contacts covers the approach.

Pulling Item 20 data with AI

The three-year tables are repetitive across brands, which makes them ideal for AI to extract and compare. FranDB has pulled outlet data by state and year from across our database of 2,488 FDD filings, so you can spot growth and decline without reading the tables one brand at a time. Connected to ChatGPT or Claude over our MCP integration, you can ask:

"Did this brand have positive net unit growth last year?"
"How many units did these franchises terminate over the last three years?"
"Which of these systems is shrinking?"
"Pull the franchisee contacts for this brand in my state."

Why Item 20 is hard to fake

Every part of an FDD is shaped, to a degree, by the franchisor's choices, except the counts in Item 20. The franchisor can decline to disclose Item 19. It can frame its support generously in Item 11. But it can't make terminated units reappear or hide a three-year slide in openings. The numbers are what they are.

That's why experienced buyers read Item 20 closely and weigh it against everything else. Pair a healthy Item 20 with disclosed Item 19 earnings and a low SBA default rate and you've got three independent signals agreeing. Then call the owners on the list, and have a franchise attorney review the agreement before you commit.

Next: Item 19 explained, or the full AI due diligence workflow.