What Are Open Units
Open units are franchise locations actively operating and generating revenue in the franchisor's system at a specific point in time. When a franchisor reports that it has 247 open units, that means 247 franchisees are currently running their businesses under that brand agreement.
The count matters because it directly reflects system health and growth trajectory. A franchisor with stable or growing open unit counts typically indicates franchisees are renewing agreements and the brand retains market viability. Declining open unit counts signal potential problems with unit economics, franchisor support, or market saturation.
Open Units in FDD Review
The Franchise Disclosure Document (FDD) requires franchisors to report open unit counts in Item 19, also called the "Franchise Business Experience" section. You'll find a table showing unit numbers as of the FDD's issuance date, broken down by the franchisor's fiscal year going back three years minimum.
Item 19 specifically separates three categories: units at the start of the period, units opened during the period, and units closed or transferred. This allows you to calculate the churn rate. For example, if a franchisor started with 150 units, opened 40 new units, and closed 25, the resulting 165 open units masks a 16.7% closure rate that period. That's material information for evaluating franchise viability.
Comparing Open Units to Unit Closures and Growth
- Raw count vs. trajectory: A franchisor with 300 open units but 15% annual closures presents different risk than one with 300 units and 2% closures, even though the current count is identical.
- Territory rights impact: Open units in your territory directly affect the franchisor's ability to place additional units near your location. Review Item 6 (fees and territory terms) alongside open unit data to understand whether the franchisor retains rights to open company-owned or competing franchised units within your territory.
- Renewal context: Unit count trends over three years reveal whether franchisees view renewal favorably. If open units declined steadily, renewal rates may be low, suggesting franchisee dissatisfaction or poor unit economics.
- Franchisor obligations correlation: The number of open units partially determines franchisor workload. A franchisor supporting 50 open units can provide different levels of training, field support, and marketing assistance than one with 500 units, even if franchise fees in Item 5 are identical.
Common Questions
- Does a higher open unit count always mean better investment potential? No. A franchisor with 500 units that closed 80 units last year is riskier than one with 200 units that closed 2. Calculate the annual closure rate by dividing closed units by the starting unit count each year. Compare this metric across competing franchises in your target market.
- How do I use open unit data when comparing franchise fees? A franchisor charging $50,000 in franchise fees with 800 stable open units may offer better support infrastructure than one charging $30,000 with 40 units and high turnover. The fee alone doesn't indicate value. Cross-reference Item 5 (fees) and Item 7 (estimated initial investment) against Item 19 data and Item 8 (franchisor obligations).
- What if the FDD doesn't break out open units by geography? Request supplemental unit counts specific to your state or region from the franchisor. Item 19 tables are system-wide, so a franchisor claiming 200 open units may have only 12 in your target state. Market saturation in your specific area determines your unit's viability, not national averages.
Related Concepts
- Unit Count (total units, including open and closed)
- Closed Units (units that ceased operations during a period)