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Franchise Unit Economics & Item 19 Reset

How a fast-growing fitness franchisor cleaned up studio P&Ls, standardized unit economics, and rebuilt Item 19 so development could sell growth with confidence.

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  • 70+ franchised locations

  • Studio P&Ls standardized across the system

  • New, defensible Item 19 built from live data

  • Clear playbook for “what good looks like” at the unit level

Client Snapshot

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  • Brand type: Boutique fitness franchisor

  • Stage: ~70 locations open / 40+ in development

  • Model: Franchise royalties + marketing & tech funds

  • Engagement: Fractional CFO & franchise finance advisory (Item 19 + unit economics)

  • Systems: QBO (multiple files), franchise royalty platform, Excel “master” files

The Situation​

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  • Development was doing its job—discovery days were full, leads were coming in, new markets were signing.

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But behind the scenes:

  • Studio P&Ls were all over the place.

  • No one could clearly answer “What does a healthy studio look like?”

  • The current Item 19 was built off a mix of old cohorts and hand-picked locations.

  • Franchisees, candidates, and private equity all asked the same question:

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“Are these numbers real—and repeatable?”

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The leadership team knew they needed a clean, defensible story for unit economics—grounded in real data, not anecdotes.

Key Challenges
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  • Inconsistent charts of accounts. Each studio’s accountant coded things differently, which made rollups and comparisons messy and unreliable.

  • No standard definition of “four-wall economics.” Some P&Ls included owner salaries, some didn’t; some mixed corporate support costs into unit results.

  • Fragmented data sources. Royalty reports, QBO files, and internal “pro forma” models didn’t tie out to each other.

  • Item 19 lagging the system. The FDD disclosure wasn’t keeping up with current performance, and development was nervous about overselling or undersharing.

What Stratego Did: From Messy Files To A Solid FDD​ Story

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Step 1: Create a Standard Franchise Chart of Accounts
 

We started with the foundation—a system-wide chart of accounts:

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  • Defined a standard P&L layout for all franchised units.

  • Mapped each studio’s existing QBO file into that structure.

  • Grouped expenses into clear buckets: revenue, COGS, labor, occupancy, marketing, tech stack, other OPEX.
     

This allowed apples-to-apples comparisons across every studio in the system.

Step 2: Normalize Unit Economics Across the System

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With a common structure in place, we:

  • Built a “Franchise Master” file with P&Ls for every open location.

  • Segmented locations by cohort (year opened), market type (urban/suburban), and maturity (ramp vs. stabilized).

  • Defined standardized metrics:

    • Revenue per active member

    • Labor % of revenue

    • Rent % of revenue

    • Marketing % of revenue

    • EBITDA margin / four-wall contribution

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The result: a clear picture of what good looks like for a profitable unit.

Step 3: Rebuild Item 19 from the Ground Up

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Working alongside franchise counsel, we:

  • Selected a defensible data set of qualifying studios based on maturity and operating standards.

  • Calculated average, median, and quartile performance for key revenue and profit metrics.

  • Ensured all calculations could be traced back to source P&Ls in the Franchise Master file.

  • Documented the methodology so finance, legal, and development all understood—and could explain—how Item 19 was built.
     

This turned Item 19 from a “best-case story” into a “here’s what our units actually do” disclosure.

Step 4: Align Development, Ops, and Finance Around One Truth

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We didn’t stop with the FDD. We helped leadership use the new data operationally:

  • Built benchmark scorecards for existing franchisees (“top 25%, middle 50%, bottom 25%”).

  • Equipped development with clean charts and talking points for discovery days.

  • Created simple guardrails for approving new franchisee business plans (e.g., rent caps as % of revenue targets).

Step 5: Install an Ongoing Update Rhythm

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To keep Item 19 and unit economics fresh, we set up:

  • A quarterly process to refresh the Franchise Master file from studio P&Ls and royalty data.

  • A checklist for when/how to update pro formas and dev materials.

  • Clear ownership between finance, legal, and development so no one was guessing who owned what.

The Results
 

  • Standardized P&Ls across the studio network using a single chart of accounts.

  • New, defensible Item 19 tied directly to real, verifiable studio performance.

  • Development team gained clear, honest talking points for candidate conversations.

  • Leadership could see which cohorts and markets outperformed—informing where to prioritize new deals.

  • Franchisees received benchmark scorecards, helping underperformers see exactly where they were off.

Need to Clean Up Your Franchise Economics & Item 19?
 

If you’re a franchisor with growing unit count but messy financials, Item 19 and unit economics can either fuel your growth or slow it down.

 

We help franchisors:

  • Standardize P&Ls across the system

  • Build a clean Franchise Master file

  • Rebuild Item 19 from verifiable data

 

Give development a story they can sell—with confidence and integrity

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