Item 18, public figures

Most restaurant filings dispose of Item 18 in a single line stating that no public figure is used. The Item still earns its place, because it is aimed squarely at one of the oldest failure modes in franchise sales: a famous name attached to an offering, a buyer who reads that name as diligence already done, and a relationship between the two that turns out to be an endorsement contract with a term shorter than the franchise agreement.

The three disclosures

Where a public figure is used in the franchise’s name or symbol, or to promote the sale of franchises, the Item has to say so and then answer three questions.

What is the person’s involvement in the actual management or control of the franchisor? This is the difference between a spokesperson and a principal. A public figure who sits on the board or runs an operating company will normally also appear in Item 2, with a five-year business history, and possibly in Item 3 and Item 4 as one of the covered individuals.

What is the person paid? The Item requires the compensation to be disclosed. That converts an implied partnership into a line item, and it is the single most clarifying disclosure in the chapter.

What has the person invested? The total investment of the public figure in the franchisor, if any. A name lent for a fee and a name attached to real capital at risk are different propositions, and you are entitled to know which one is on the deck.

Why the Item exists

The reasoning is straightforward. A buyer evaluating an unfamiliar restaurant system has very little to go on: a young brand may have a short Item 3, a thin Item 20, and an Item 19 that either says nothing or rests on a handful of outlets. Into that uncertainty, a recognisable name arrives as a substitute for evidence. Item 18 does not prohibit the arrangement. It requires the arrangement to be described, so that you can see whether the famous person’s exposure to the outcome resembles their own.

The asymmetry is usually large. A franchisee here is committing, on disclosed Item 7 totals, somewhere between Shah’s $197,000–$405,000 (FDD issued 10 April 2024) and Pepper Lunch’s $609,200–$1,471,500 (May 2024 comparative study), for a term that is ten years in most of these filings and thirty-five at The Great Greek Mediterranean Grill (FDD issued 17 August 2023). An endorsement agreement is generally shorter than any of those and can usually be ended. Whatever the public figure has agreed to, the franchisee’s commitment outlasts it.

What a famous origin story is not

Several brands here carry a genuine public reputation that has nothing to do with Item 18. The Halal Guys began in 1990 and started franchising in 2014, reaching 93 outlets by 2024 in the May 2024 comparative study; the queue outside the original operation is part of the brand’s public identity. Wienerschnitzel has been franchising since 1965 with 323 outlets. Pepper Lunch’s operator site claims more than five hundred locations across fifteen countries against six disclosed US units.

None of that is a public-figure disclosure. It is history, reputation and, in Pepper Lunch’s case, an international footprint sitting behind a small US offering. The relevant Items are 1, 2 and 20. Confusing brand fame with a personal endorsement leads a buyer to look for reassurance in the wrong chapter and to miss that Item 18 is silent because there is nothing to disclose, not because something has been left out.

Where the Item interacts

Item 18 sits beside Item 19 in more than page order. Both are places where a buyer’s optimism can outrun the document, and both are governed by the same principle: only what is disclosed may be relied on. A public figure’s presence says nothing about outlet performance, and a system with a well-known face may make no financial performance representation at all — several filings here make none, including Shah’s, The Halal Guys’ and Crave’s records.

It also touches Item 11 and Item 6. If a public figure’s likeness drives the advertising a brand fund pays for, ask what happens to that creative if the arrangement ends. A system that has spent several years of a 2% or 3% fund building recognition around one person carries a concentration risk that no Item quantifies, and franchisees paid for the asset.

The questions to ask, if the Item is populated

Ask how long the arrangement runs and what termination rights each side has. Ask whether the compensation is fixed, variable with franchise sales, or equity, since a person paid per franchise sold has an interest in volume rather than in unit outcomes. Ask whether the person has any operational role, any veto, or any responsibility for support. Ask whether they own or have ever owned an outlet, and if so, whether it is inside any Item 19 population.

Ask, too, what the franchisee is obliged to do with the association. Where a public figure’s name or likeness forms part of the system’s identity, the standards a franchisee must follow will govern its use in the store, on packaging and in local marketing, and those obligations sit in Item 9 and Item 13 rather than here. A licence that can be withdrawn while a franchisee’s signage still carries the name is a sequence worth thinking through in advance.

And if the Item is silent while a recognisable name appears in the recruitment materials, ask why. There may be a perfectly good answer — a consumer endorsement that is not used to sell franchises is not this Item’s subject. But the question belongs on the list, and the answer belongs in writing next to the filing.

Related reading

• Item 2, business experience — where a real principal’s history appears
• Item 19 — the only place performance may be represented
• Red flags in franchise marketing — reputation used in place of disclosure
• Item 11, franchisor assistance — the advertising the funds pay for
• Franchisor question list — how to put these questions in writing