How They Mislead With Item 19 (DonutNV Example 1)
According to the FTC, “The FTC’s Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document [in Item 19].” Since there is no FTC review of the claims made in franchise sellers’ Item 19 Financial Performance Representations, some sellers get “creative” in crafting their Item 19 earnings claims… while others are outright deceptive. The First in a Series. by Sean Kelly
(UnhappyFranchisee.Com) I’m not saying DonutNV, Franchise Fastlane & countless franchise brokers intentionally misled (& mislead) franchise buyers regarding sales, profit margins and the mini-donut franchise’s viability as a semi-absentee, passive investment. It could have been accidental. Or inadvertent. But DonutNV sellers’ promotion of selective earnings information in favor of more relevant, less-flattering information for DonutNV franchisee recruitment deserves special recognition in the “How to Mislead With Item 19” playbook.
In their 2023-2024 FDDs, DonutNV Franchising Inc. disclosed gross sales from two separate sources:
- Unimpressive but relevant gross sales of actual franchisees, and
- Highly impressive but irrelevant (IMHO) gross sales of a single, non-franchised “Unicorn” affiliate sales trailer.
DonutNV Gross Sales Disclosed in Item 19 – Actual Franchise vs. Unrepresentative Affiliate
2023 FDD (2022 Sales)
- Actual Franchises: $127,871 (Median: $68,999)
- Unrepresentative Affiliate: $200,693
2024 FDD (2023 Sales)
- Actual Franchises: $106,393 (Median: $85,995)
- Unrepresentative Affiliate: $169,809
2025 FDD (2024 Sales)
- Actual Franchises: $159,707 (Median: $124,350)
- Unrepresentative Affiliate: $213,522*
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Why the Non-Franchise Affiliate is an Irrelevant “Unicorn,” IMHO
I refer to the non-franchise affiliate as a “Unicorn” because it had (and has) a one-of-kind situation no franchisee could, or would be allowed to, duplicate:
- The trailer began operating under the “DonutNV” brand name in 2018.
- It operates in a long-established home market Pennsylvania.
- It appears to have the support of a brick-and-mortar store
- The trailer is not a franchise & is not under franchise restrictions
- It is operated by an experienced partner/manager who is paid a percentage of operating profits.
- Unlike DonutNV franchises, the affiliate has NO territorial restrictions.
The gross sales of the franchise units are likely skewed upward, especially in the 2025 FDD, for two reasons.
First, the average excludes a number of franchises who didn’t comply with their request for detailed financial data. We suspect that if these franchises were believed to be above average, DNV would have been more insistent that they be included.
Second, a number of gross sales entries attributed to a single franchise (according to the Item 19 footnotes) were actually combined sales of as many as three or four businesses and multiple trailers.
But even if skewed, at least they are derived from actual franchise operations… unlike the Unicorn sales and profit figures.
The DonutNV “Success Story” is Built on a Bait-And-Switch Claim
The term “Bait-&-Switch” refers to the deceptive practice of advertising one product, then switching it out with another, inferior product.
In this case, one could argue that the DonutNV Item 19 is set up to offer a business concept that provides the results of the single non-franchise affiliate trailer unrepresentative of a franchisee’s operation, but then delivers a business incapable of providing those results.
For example, this ad on Franchise Solutions states:
Own the fastest-growing food truck business in the world, demonstrating 84.6%* margins!
…Thanks to the simple model we’ve developed, which includes low overhead and minimal employee requirements, our Franchise Owners are producing substantial revenue. In 2022, we showed $200,693 in Gross Sales and a $169,799 Adjusted Net Profit- an 84.6% net margin*!
Insane Net Margin Potential: With DonutNV, you not only get a fun business to help you leave the corporate world, but you also get the profits to back it up! In 2022, our Gross Sales were over $200K, with an Adjusted Net Profit after Franchise Fees over $169K. That’s an unheard-of 84.6% Net Margin!*
Keep Your Day Job: As a DonutNV Owner, you can choose to run the events yourself or hire a General Manager to oversee your employees and the day-to-day operations of your business. If you are looking to keep your current career or add a business to your portfolio, that is absolutely an option.
The asterisk indicates that the 2023 FDD substantiates that “franchise owners are producing substantial revenue.”
But those numbers aren’t produced by franchise owners.
They were produced by the Unicorn.
A close look at the FDDs reveal that DonutNV & Franchise Fastlane have produced some very questionable earnings claims that every prospective franchisee, every consultant/broker, the FTC, state regulators & law enforcement should look into.
Read our continuing reporting & analysis on DonutNV here: The DonutNV Franchise Report (Index)
Do you know a “creative” franchise Item 19 Representation?
Are you familiar with the DonutNV franchise opportunity?
Are you familiar with Franchise Fastlane?
Please leave a comment below or email us, in confidence, at UnhappyFranchisee[at]Gmail[dot]com.
Franchisors: The franchisor, its employees and agents are invited to submit correction, clarifications, rebuttals or other opinions for immediate consideration.
UnhappyFranchisee.com is not associated with this or other franchise company or seller.
Tags: DonutNV, DonutNV franchise, DonutNV franchise earnings, DonutNV franchise opportunity, Item 19, Financial Performance Representations, Franchise Earnings Claims, Donut franchise, Franchise Fastlane, Alex Gingold, Amanda Gingold, Jake Hamburger, Franchise Sidekick, Joseph Ferris, Klehr Harrison, Attorney David Saulino, Spadea Law,
