What Is Comp Sales
Comp sales, short for comparable store sales, measures revenue growth from franchises that have been open for at least 12 months, comparing year-over-year performance. It strips out noise from new unit openings, closures, and seasonal volatility to show actual performance trends at the unit level.
For franchise buyers, comp sales data is critical because it reveals whether existing franchisees are growing revenue or sliding backward. A franchisor with 8% comp sales growth over three years tells a very different story than one with flat or negative comps. This distinction matters enormously when you're evaluating whether the franchise model actually works in practice.
Comp Sales and FDD Item 19
Item 19 of the Franchise Disclosure Document (FDD) is where franchisors must disclose financial performance, including comp sales data if they choose to provide it. However, Item 19 is voluntary. A franchisor is only required to include it if they make any financial performance claims at all. If Item 19 exists in an FDD you're reviewing, it must be substantiated by the franchisor with written records.
Pay attention to how comp sales are calculated in Item 19. Some franchisors report comp sales across their entire system. Others break it down by region, concept, or vintage year (when units opened). A franchisor claiming 5% system-wide comp sales might be hiding the fact that locations over three years old are actually declining while new units pull the average up.
Ask your franchise attorney to compare comp sales trends year-over-year in Item 19. Three consecutive years of declining comps is a major warning sign. Steady or growing comps suggest the model sustains itself and can support your franchise fees and ongoing royalty obligations.
Territory Rights and Comp Sales Expectations
Your territory rights directly affect comp sales potential. If you're granted exclusive rights to a densely populated urban area with high foot traffic, your comp sales ceiling is higher than a franchisee in a rural territory of equal size. When reviewing your franchise agreement, verify the territory definition, population density assumptions, and whether the franchisor's Item 19 comp sales reflect territories similar to yours.
Some franchisors allow area developers to open multiple units within a territory. This cannibalization can depress individual unit comp sales even if the franchisor's system comp sales look healthy. Ask for comp sales data broken down by unit density and market type so you understand realistic expectations for your specific location.
What Comp Sales Reveal About Franchisor Support
Weak or declining comp sales often signal inadequate franchisor support. If franchisees are struggling to grow revenue, the issue may be poor training, weak marketing support, outdated operations systems, or failure to adapt to market changes. Review the FDD's Item 6 (franchisor's obligations) and Item 11 (assistance and advertising) against comp sales trends. A franchisor with negative comps but minimal training investment is showing you where their priorities actually lie.
Conversely, strong comp sales with rising renewal rates suggest the franchisor invests in systems that work. When you review renewal terms in Item 17, check whether franchisees renew at high rates. High renewal rates plus positive comp sales indicate franchisees are making money and want to stay.
Common Questions
- What's a healthy comp sales number? Positive comp sales of 2% to 5% annually is considered healthy for mature franchise systems. Anything above 5% is strong. Flat or negative comps warrant skepticism unless the franchisor can explain market conditions or recent operational changes.
- Can I request comp sales data that's not in Item 19? Yes. If Item 19 doesn't exist or is limited, ask the franchisor directly for comp sales data by year and market type. Reputable franchisors will provide it; evasiveness is a red flag.
- How do comp sales relate to my franchise fee and royalties? If you're paying an 8% royalty on revenues but existing franchisees' comp sales are negative, you're buying into a model where most franchisees lose money after royalties. Comp sales must exceed your royalty percentage plus operating costs for the model to be viable.