Outlet

A business location operated under a franchise brand either by the franchisor or a franchisee

What is an Outlet in Franchising

An outlet is any business location where goods or services are offered under a franchise brand. Outlets represent the physical or operational units that make up a franchise system. Each outlet contributes to revenue generation, brand reach and the overall customer experience.

An outlet can be a traditional storefront or a non traditional model such as a mobile unit, kiosk or service area where customer interactions and transactions occur.

📍 In simple terms, if the brand is operating and serving customers, the location or unit is considered an outlet.

Company Owned Outlets

Company owned outlets are business locations that operate a business substantially similar to the franchises being offered but are not franchisee-owned outlets. These units are controlled by the franchisor, an affiliate of the franchisor or an individual or entity identified in Item 2 of the FDD such as an officer, director or owner of the franchisor.

The North American Securities Administrators Association (NASAA), the FTC, and franchise examiners take a broad view of what counts as a company owned outlet to prevent franchisors from hiding operational performance. That means company owned outlets include:

Outlets operated by the franchisor directly
Outlets owned or operated by any affiliate of the franchisor
Outlets controlled by Item 2 individuals or their entities
Any under the same business model, even if operated under a different brand name
Units that offer substantially similar products or services, even if branding is not identical

📌 The key test is operational similarity, not just trademark usage.

This prevents a franchisor from excluding underperforming or failed locations simply by placing them in a different subsidiary or rebranding them. If the business operates like the franchise system, regulators expect those outlets to be disclosed.

Company owned outlet data must be accurately included in Item 20 tables, including openings, closures, transfers and net growth. These outlets also often influence Item 19 earnings claims because they may represent showcase performance or operational benchmarks.

Franchised Outlets

Franchised outlets are owned and operated by franchisees who are granted rights to use the franchisor’s trademarks, systems and support model. These outlets are the core of franchise system expansion and represent brand growth in new markets.

Franchisees usually operate within a defined territory to ensure market opportunity and prevent internal competition but not all systems grant protected territories.

Outlets and Franchise Territories

Although outlets and territories are closely related they are not always identical in structure or boundaries.

When They Align

One territory equals one outlet
- Common in brick and mortar concepts where a specific location serves a specific geographic area
- Common in service based businesses where the franchisee serves a customer at their home or office

When They Do Not Align

Multiple outlets exist inside the boundaries of one territory.
- Common in mobile businesses where a single territory may be of sufficient size to support two, three, or more mobile units in operation
One outlet may serve customers across multiple territories
- Common with multiple unit fleets that may operate across territories and regional businesses
A territory may be granted before an outlet exists
- Territory first strategies are common while franchisees secure real estate or begin pre opening operations for brick and mortar locations

📍 Territories represent a franchisee’s rights. Outlets represent actual operating businesses.

This distinction must be clearly documented in Item 12 and tracked for Item 20 reporting.

Outlet Tracking and Item 20 Compliance

Item 20 requires franchisors to disclose:

Total outlets in operation
Net growth or decline in the system
Transfers, closures and terminations
Company owned vs franchised outlet counts
Future openings already committed

Accurate outlet tracking is essential for:

Franchise sales credibility
Regulatory compliance
Performance benchmarking
Territory management
Franchisee validation efforts

FDD data must align with what is reflected in territory mapping and internal franchise operations. Errors in Item 20 can have a ripple effect in Item 19 and other areas for years down the road and expose franchisors to significant legal risk and exposure.

Outlets in Non Traditional and Mobile Concepts

Mobile or service based brands often operate across wide areas which creates unique challenges:

Multiple vehicles or teams may count as one outlet or multiple outlets
One outlet may produce revenue across an entire region
A franchisee may need several outlets later to maintain performance
Territories may not rely on ZIP Codes or census tracts if coverage is broad

In these systems outlet reporting is often tied to the definitions set forth in the Franchise Disclosure Document and the franchise agreement rather than the number of vehicles or shifts used.

⚠️ The franchisor must ensure outlet counts are applied consistently to avoid Item 20 inaccuracies.

Related Features

Franchise Territory Mapping
Demographic Analysis
Reporting
Integrated Document Signing

Last updated: December 5, 2025

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