US Franchise FDD Item 20: Build Reliable Outlet Records

Before you recruit your first franchisee in the United States, organise the history of your existing locations. Franchise Disclosure Document (FDD) Item 20 covers outlets and franchisee information, helping prospective owners understand how a franchise community has developed. For an established business preparing to franchise, the practical challenge is turning scattered opening dates, ownership records and closure notes into a reliable disclosure record.

Understand what Item 20 is designed to show

The Federal Trade Commission’s Franchise Rule requires an FDD containing 23 disclosure items, unless an exemption applies. Item 20 presents information about company-owned and franchised outlets, changes in their status, projected openings and franchisee contacts.

Its prescribed tables generally cover the three most recent fiscal years. They distinguish between events such as openings, transfers, terminations, non-renewals, reacquisitions by the franchisor and other cessations of operation. These categories are not interchangeable: a franchisee selling an operating outlet is different from an outlet closing permanently.

An existing business with no franchisees should not assume Item 20 is irrelevant. Company-owned outlet history and plans for expansion can still require disclosure. Your franchise solicitor should determine which existing operations belong in the tables, particularly where related companies own locations or the proposed franchise format differs from the original business.

Federal disclosure is not federal registration or approval. State franchise registration and disclosure laws may impose additional requirements, so the completed document must also be reviewed for the states where you intend to offer franchises.

Create one outlet register before drafting

Build a master register with one record for each location. Use a permanent identifier rather than relying solely on its trading name or address, which may change.

For each outlet, collect:

• Its address, state and operating format.
• The legal entity that owns and operates it.
• Whether it is company-owned or franchised.
• Its actual opening date and, where relevant, closure date.
• Dates and details of ownership changes.
• Supporting records, such as acquisition documents, signed agreements and opening reports.

Separate operational dates from contractual dates. Signing a lease does not mean an outlet has opened; signing a franchise agreement does not mean the franchisee is trading. Keep both dates where relevant rather than forcing them into a single field.

For your existing locations, reconcile the register against accounting records and corporate ownership documents. If a location moved, changed format or traded intermittently, record the facts and ask your solicitor how it should be presented. Do not quietly omit an awkward history because it complicates the table.

Classify changes consistently

Assign someone responsibility for recording outlet events as they happen. Finance, operations and legal teams may each know only part of the story, so a shared process is more reliable than asking everyone to reconstruct events at year end.

Create an internal event form recording the location, effective date, previous owner, new owner, operational status and supporting documents. Leave the final disclosure classification to the person responsible for preparing the FDD, with legal review.

For example, if you buy a franchised outlet and continue operating it yourself, the record should preserve both the ownership change and the fact that trading continued. Describing it simply as a closure would obscure what happened.

Reconcile each year’s starting and ending totals, and check that movements agree across the prescribed tables. Where an outlet experiences several events in one year, obtain advice on the applicable reporting instructions rather than choosing whichever classification looks most favourable.

Prepare contacts and projections with care

Item 20 also requires specified contact information for current and certain former franchisees. Build the ability to capture and maintain those details from your first franchise agreement onwards. Have your solicitor apply the Rule’s precise selection, timing and coverage requirements.

Explain to franchisees that required contact details will appear in disclosure materials. Limit internal access appropriately, but do not promise confidentiality that would prevent mandatory disclosure. Prospective owners use these contacts to investigate the opportunity independently.

Maintain a separate schedule for signed agreements covering outlets not yet open and for projected openings. Distinguish contractual commitments from internal ambitions, and retain the assumptions behind projections. A recruitment target should not automatically become an opening forecast.

The FTC Rule generally requires delivery of the FDD at least 14 calendar days before a prospective franchisee signs a binding agreement or pays the franchisor or an affiliate in connection with the proposed sale. Accurate Item 20 records therefore need to be ready before transactions reach that stage, not assembled afterwards.

Practical takeaway: Build your outlet register before launching franchise recruitment. Record ownership, operating status and dates separately, retain evidence, and have your franchise solicitor translate those facts into the required Item 20 disclosures.