Fundamentals

Franchise Attrition Rate

Also known as: Closure Rate, Churn Rate, Turnover Rate

Franchise attrition rate measures the percentage of franchise locations that close, terminate, or leave the system in a given year relative to the total number of locations. Calculated from Item 20 data in the FDD, attrition rate is one of the most revealing indicators of franchise system health. A healthy franchise system typically has an attrition rate below 3-5%, meaning fewer than 5 out of 100 locations close annually. Rates above 8-10% signal systemic problems — poor unit economics, inadequate support, territory issues, or an unsustainable business model. Attrition should be analyzed alongside system growth: a brand opening 50 new locations but closing 30 has a net growth problem masked by gross expansion numbers.

Real-World Example

A fitness franchise's Item 20 shows 500 total locations at year start, 40 new openings, and 35 closures during the year. The gross attrition rate is 7% (35/500), and net growth is only 5 locations (1%). Compare this to Jersey Mike's, which consistently shows attrition below 2% alongside double-digit unit growth — a much healthier system trajectory.

Related Terms

Item 20 (Outlet and Franchisee Information)
Legal & Compliance
Franchise Default Rate
Financial
Franchise Health Score
Fundamentals
Franchise Termination
Legal & Compliance

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Last updated: April 2026