The State of Franchising 2026

1. Industry Breakdown

Top 15 industries by brand count, with median total investment, average royalty rate, and average net unit growth observed in the most recent FDD year.

† Travel category averages are skewed by hotel-flag franchises with $20M+ build costs. * Health/wellness growth excludes one outlier brand >5,000% YoY. Source: FDDIQ corpus, computed 2026-04-09.

QSR remains the gravity well of franchising at 1,616 brands - nearly 28% of the entire corpus. But the more interesting story is home services: 572 brands, a sub-$400K average investment, and the highest organic growth rate of any major category. This is where private equity rollups have spent the last 36 months building platforms, and the unit count reflects it.

Financial services is the lone major category shrinking on net (−1.6% average growth) and also charges the highest royalty in the corpus at 12.1%. That combination - high fees, contracting unit base - historically precedes brand consolidation. Watch this space in 2026.

2. Growth Winners & Losers

Net unit change over the most recent reported FDD year, ranked by absolute change. Outlier brands with non-credible reporting (e.g. negative absolute unit counts) have been excluded.

Top 10 Fastest Growers

Top 10 Sharpest Declines

The winners list is a clinic in non-traditional growth vectors: commercial cleaning master franchises (Stratus, Signal), sandwich/QSR with strong unit economics (Jersey Mike's), and travel/cruise resellers riding the post-pandemic leisure wave (CruiseOne, Cruise Planners). Notably absent from the top 10 are most legacy QSR megabrands.

The losers list is a horror show of brand contraction. Subway and Burger King continue to shed units. Crumbl - last cycle's growth darling - is now reporting net unit reductions, the first time it has done so in our corpus. Kona Ice and Noble Roman's are showing signs of system collapse. Get the full context on any of these brands inside the FDDIQ database.

3. Investment Landscape

Distribution of franchise systems by midpoint total investment tier, with average net unit growth observed within each tier.

The bell curve here is striking. 71% of all franchise brands fall between $100K and $1M total investment, with the two middle tiers - $100K–$250K and $250K–$500K - accounting for half the entire corpus. The growth winner is unambiguous: the $100K–$250K tier averaged +26.9% net unit growth, the highest of any segment.

The surprise is what didn't happen. The under-$100K tier - which a decade of franchise marketing has positioned as the "low risk" gateway - underperformed every other tier (+14.3%). These cheap concepts are growing slower than the brands that cost five times as much. Read that twice. Cheap doesn't mean safe; cheap means the brand often can't fund its own infrastructure.

4. Item 19 Transparency

Item 19 of the FDD is the Financial Performance Representation - the only place a franchisor can legally share unit-level revenue or earnings data. Disclosure is optional, which makes it one of the most predictive variables in our corpus.

Disclosure Rate by Industry

The transparency gap is narrowing across the board, but cleaning, home services, and staffing lead the field. These are also the categories with the lowest customer acquisition cost and the most defensible unit economics - not a coincidence. When the math works, franchisors are happy to show the math. Education and technology trail near 85%, often because of legitimate variability in unit revenue rather than concealment.

Use the franchise due diligence checklist to pressure-test any Item 19 you receive - disclosure alone is necessary but not sufficient.

5. SBA Default Analysis

SBA 7(a) charge-off rates by franchise category, 2010–2026 cumulative. We require a minimum of 20 funded loans per brand and 5 brands per category for inclusion.

The 0% default list is a master class in brand discipline. Primrose Schools (385 funded loans, zero charge-offs), Nothing Bundt Cakes (315 loans), and Crumbl (292 loans) have managed dozens of SBA-backed openings over more than a decade without a single charge-off. That is not luck - it's a function of disciplined site selection, real-estate underwriting, and franchisee approval.

On the other end, Experimac sits at a 67% default rate across 66 funded loans - a brand that should be a default red flag for any prospective buyer. See more brand-level detail on /sba-defaults.

6. Royalty Burden Analysis

Average royalty rate plus average ad fund contribution by industry. The "royalty burden" total is the headline cost a franchisee pays the franchisor every week before any other operating expense.

Financial services franchises charge by far the highest royalty burden at 13.96% - driven by the optics of "intangible IP-heavy" service businesses. Fitness, education, and casual dining round out the top of the table at 10.7%–11.7%, while QSR - somewhat counterintuitively - sits at the bottom of the burden table at 7.33%. Volume-driven food businesses can carry more royalty in absolute dollars on a smaller percentage rate.

Rule of thumb: every 1 percentage point of royalty burden converts directly to roughly 5% of franchisee EBITDA at typical 20% margins. A 13.96% burden vs a 7.33% burden is the difference between a healthy unit and a struggling one - even before any unit-level operations risk.

7. 2026 Outlook

Data-driven predictions based on multi-year longitudinal trends in the FDDIQ corpus.

Methodology