What FDD Item 20 Actually Tells You
Item 20 of the Franchise Disclosure Document is formally titled "Outlets and Franchisee Information." It requires the franchisor to provide a detailed count of every franchised and company-owned outlet at the beginning and end of each of the last three fiscal years. But the real value isn't in the raw numbers — it's in the movement between them.
The outlet summary table breaks down changes into four categories:
- New openings: Franchised units that began operation during the fiscal year
- Closures: Units that ceased operations (the most concerning category)
- Transfers: Units that changed ownership but remained operational
- Franchisor buybacks/non-renewals: Units reclaimed or not renewed by the franchisor
Together, these four data points tell you whether a franchise system is expanding, contracting, churning owners, or stagnating. No other FDD section provides this level of objective, verifiable system health data. While Item 19 financial performance representations can be cherry-picked by franchisors (they choose what to disclose), Item 20 outlet counts are binary — a unit is either open or it isn't.
What the Data Shows: Real Unit Growth and Contraction
The International Franchise Association's 2026 Franchising Economic Outlook projects over 12,000 new franchise establishments in 2026, with total economic output rising 1.6% to exceed $921 billion. The number of franchise establishments is expected to grow from 832,521 to 845,000 units — a 1.5% increase. Employment in franchising should rise by more than 150,000 jobs (1.8%) to nearly 8.9 million.
But those aggregate numbers mask dramatic variation at the brand level. Our analysis of the FranchiseIQ corpus — covering 420+ franchise brands from actual 2025 FDD filings — reveals a stark divide between growing and contracting systems.
Here are some of the most notable unit changes from the data:
| Brand | Units (Prior Year) | Units (Current) | Net Change | Growth % |
|---|---|---|---|---|
| Subway | 20,576 | 20,133 | -631 | -3.1% |
| McDonald's | 12,764 | 12,772 | +102 | +0.8% |
| Burger King | 6,992 | 6,640 | -1,116 | -16.0% |
| Dunkin' | 8,087 | 8,265 | +200 | +2.5% |
| 7-Eleven | 7,388 | 7,218 | -595 | -8.1% |
| Taco Bell | 7,056 | 7,198 | +166 | +2.4% |
| Jersey Mike's | 2,361 | 2,647 | +308 | +13.0% |
| Ace Hardware | 4,645 | 4,759 | +150 | +3.2% |
Source: FranchiseIQ analysis of 2025 FDD filings (Item 20 outlet data). Unit counts reflect franchised outlets. Current = most recent filing year.
The data tells a clear story. Subway, despite being the largest franchise system in the US by unit count (20,133), continues to contract — losing 631 net units in the most recent reporting period. That's a -3.1% decline, continuing a multi-year downsizing trend as the brand works through a major restructuring and modernization effort. For prospective franchisees, the question is whether the remaining units are profitable enough to justify the investment.
Burger King's situation is more alarming. The loss of 1,116 units (-16.0%) in a single year is one of the largest absolute unit declines in the franchise industry. While Restaurant Brands International has invested heavily in restaurant reimaging and technology, the closures suggest deep challenges with unit economics and franchisee viability at the operator level.
On the growth side, Jersey Mike's stands out with 13% unit growth — adding 308 locations. Taco Bell continues its steady expansion (+166 units, +2.4%), and Dunkin' added 200 net new units. These are systems where Item 20 data confirms that franchisee demand for new units remains healthy.
2026 Industry Context: Where Franchising Is Growing
The IFA's 2026 Outlook provides crucial context for interpreting Item 20 data. Not all growth is equal — and the fastest-growing segments may surprise you.
Child services and commercial/residential services are projected to be the fastest-growing franchise industries at 3.2% year-over-year. For the first time since the pandemic, full-service restaurants are expected to outpace quick-service restaurants in output growth — a notable shift. Meanwhile, QSR margins are under pressure from intensifying competition, elevated input and labor costs, and constrained ability to pass price increases to consumers.
Geographically, the Southeast (1.7% growth) and Southwest (2.5% growth) remain the fastest-growing regions for franchising. The top 10 fastest-growing states for franchising in 2026 are Texas, Florida, Georgia, Arizona, North Carolina, Colorado, Michigan, Utah, Ohio, and Maryland. Michigan, Ohio, and Utah are new entrants to the top 10, driven by relative affordability and expansion potential.
Total franchise GDP is estimated to grow 1.8% from $549.9 billion to $558.4 billion. Private equity investing in franchising accelerated in Q3 and Q4 of 2025 and will continue to pick up in 2026 — a trend that directly affects Item 20 data as PE-backed brands often pursue aggressive unit expansion strategies.
Five Red Flags in Item 20 Data
When analyzing Item 20, these patterns should trigger deeper investigation:
1. Multi-Year Net Unit Contraction
A single year of closures can be a reset. Two or more consecutive years of net unit losses suggests systemic issues. Subway has been contracting for years — its US unit count dropped from roughly 27,000 in 2015 to 20,133 today. While management frames this as "rationalization," the sustained shrinkage means fewer franchisees are willing to invest, and remaining operators face reduced brand presence and marketing scale.
2. High Closure-to-Opening Ratio
If a system is opening 100 units but closing 80, the net growth looks positive (20 units) but the underlying churn rate of 80% is alarming. This pattern often indicates that new franchisees are being recruited to replace failing ones, creating a treadmill effect. Franchisors rarely volunteer this interpretation, but the math in Item 20 makes it visible.
3. Rising Transfers Without Growth
Transfers keep unit counts stable but signal operator dissatisfaction. When a system shows flat or declining total units but rising transfers, it means existing franchisees are selling and leaving rather than expanding. The FRANdata analysis from FLDC 2025 showed the franchise transfer rate hit 4.1% in 2024 — the highest in five years. Some of this is natural succession planning, but elevated transfers in younger systems warrant caution.
4. Company-Owned Units Declining Faster Than Franchised
When a franchisor is closing its own company-owned stores faster than franchisee stores, it may indicate the economics don't work even for the entity with the most data and control. Franchisors sometimes refranchise company units, but forced closures of corporate locations are a negative signal.
5. Item 20 Contact List Shows Concentrated Exits
Item 20 also requires franchisors to list all franchisees who left the system, with contact information, for the last three years. If the exits are concentrated in specific regions or among franchisees who owned multiple units, this may point to territory-level problems rather than individual operator failures. Always call several former franchisees — the pattern in their stories matters more than any single data point.
A Framework for Reading Item 20
Here's a systematic approach to extracting maximum value from Item 20:
- Calculate the net unit change rate. Divide the net change in total units by the starting count. Compare this to the IFA's 1.5% projected industry growth rate. A brand growing below this rate is losing relative market share.
- Separate new openings from transfers. New openings represent genuine expansion. Transfers represent ownership changes. A system growing primarily through transfers isn't truly expanding — it's recycling.
- Compare closure rates across years. Look at the three-year trend in Item 20, not just the most recent year. A declining closure rate is positive; an accelerating one is negative. The trend matters more than any single year.
- Cross-reference with Item 19. If Item 20 shows contraction AND Item 19 shows declining revenue per unit, the system is in distress. If units are declining but revenue per unit is stable or growing, the franchisor may be pruning underperforming locations — which can actually strengthen the system.
- Call the franchisees on the exit list. Item 20 requires disclosure of contact information for franchisees who left. Use it. Former franchisees have no obligation to protect the brand and will often share unvarnished perspectives on unit economics, support quality, and the real reasons for exit.
Our FDD Analyzer tool automatically extracts and benchmarks Item 20 data, comparing any franchise system's unit growth against industry averages and flagging the red flags described above.
Case Studies: What Item 20 Reveals About Major Brands
Subway: Controlled Contraction or Systemic Decline?
Subway's Item 20 data shows a system that has been contracting for nearly a decade. From roughly 27,000 US locations in 2015 to 20,133 in the most recent filing — a loss of approximately 6,867 units, or 25% of the network. The most recent year shows a loss of 631 units (-3.1%).
The bull case: Subway's restructuring under new ownership (Roark Capital acquired the brand in 2024) involves closing underperforming locations and investing in store remodels. The remaining 20,133 units may represent a healthier, more profitable base. The bear case: multi-year contraction often creates a negative feedback loop — fewer locations mean reduced brand visibility, lower advertising fund contributions, and less negotiating leverage with suppliers.
For a prospective Subway franchisee, the key question isn't whether the system is contracting (it is), but whether the unit economics of a new or remodeled location justify the investment despite that contraction. Item 20 alone can't answer this — you need Item 19 financial data and conversations with recent franchisees.
Burger King: The Scale of Distress
Burger King's loss of 1,116 units in a single year (-16.0%) is one of the largest absolute unit declines in the QSR sector. This isn't a slow rationalization — it's a rapid contraction that raises fundamental questions about the viability of the franchise model for many operators.
The IFA reports that QSR brands are facing "margins under pressure from intensifying competition, elevated input and labor costs, and a constrained ability to pass price increases on to consumers." Burger King's Item 20 data is the most dramatic manifestation of this trend. Franchisor Restaurant Brands International is responding with technology investments and smaller format stores, but the unit decline shows the challenge of turning around a struggling franchise system at scale.
The Bottom Line
Item 20 is the most objective section of the FDD. A franchisor can choose not to include Item 19 financial data, can frame litigation favorably in Item 3, and can describe fees in the most favorable light. But Item 20 unit counts are verifiable — a location is either operating or it isn't.
The 2026 franchise landscape is bifurcated. Overall, the industry is adding 12,000 new establishments and generating over $921 billion in output. But beneath those headline numbers, brands like Burger King are shedding units while Jersey Mike's and Dunkin' are expanding. Item 20 is your tool for identifying which side of that divide any franchise system falls on.
Before you sign any franchise agreement, read Item 20 carefully, compare the data to industry benchmarks, call former franchisees, and run the numbers through our analyzer. The outlet data won't tell you everything, but it will tell you whether the system is growing, stable, or declining — and that's the single most important fact to know before you invest.