The number of US franchised establishments is forecast to reach about 845,000 in 2026, up 1.5% from 832,521 in 2025. For buyers, an established brand and operating system can reduce the work involved in starting a business, but fees and contractual restrictions still affect whether an individual outlet is viable.
The International Franchise Association’s 2026 outlook also forecasts nearly 8.9 million franchise jobs and $921.4 billion in economic output. FRANdata produced the report for the industry association. These are sector forecasts, not evidence that a particular franchise will make money.
The US Federal Trade Commission (FTC) puts the risk plainly in its guide for prospective buyers: buying a franchise offers “no guarantee of success”.
What is a franchise?
A franchise is an arrangement allowing a person or business, the franchisee, to operate using another company’s brand and business system under agreed terms. The company providing those rights is the franchisor.
The franchisee normally invests in the operation and pays an initial fee, with continuing charges often following. Training, operating procedures and marketing assistance may be included, although their scope depends on the agreement.
The attraction is an existing system. A recognised name can make it easier to attract customers, while established procedures reduce the number of decisions a new owner must make.
For the franchisor, local operators can contribute capital and run outlets without the brand owner managing every location itself. The arrangement also operates at a much larger scale than a single shop.
In our earlier coverage of JD Sports’ Mexican expansion, the retailer agreed a franchise partnership with Grupo Axo, which will operate the JD brand’s stores and e-commerce business there from 2027. It is an example of dividing brand ownership from local operations, rather than a forecast of returns for an individual buyer.
Fees affect what the owner keeps
The initial franchise fee is only one expense. Premises, equipment, stock and wages also need funding, including during the period before sales cover the costs of operating.
Royalties may be charged on gross sales, meaning revenue before expenses, and can remain payable when an outlet loses money. Advertising contributions can add another continuing cost.
A busy outlet can still produce little profit after rent, staff, supplies and franchise payments. Borrowing to fund the investment adds interest costs and repayment obligations. The relevant calculation is what the owner retains after all expenses, not how much the outlet takes through its tills.
Owners also accept limits on their discretion. The FTC says franchisors may control products, suppliers, opening hours, appearance and territories. Consistency helps customers recognise the brand, but it can prevent local operators from changing the business as freely as an independent owner could.
The regulator’s 2024 review of franchise concerns recorded complaints about fees, supply restrictions, operating-manual changes, renewals and marketing-fund transparency. The FTC cautioned that the submitted accounts were unverified and were not necessarily representative of all franchisees’ experiences.
Check the disclosure and the contract
In the United States, the FTC Franchise Rule requires a disclosure document containing 23 specified items. Subject to applicable exemptions, a prospective buyer must receive the Franchise Disclosure Document (FDD) at least 14 calendar days before signing a binding agreement or making a payment to the franchisor or an affiliate in connection with the proposed sale.
The required disclosures cover fees, estimated initial investment, supplier restrictions, assistance, territory and contractual terms. These US requirements should not be assumed to apply in other countries.
Item 19 deals with financial performance claims. Franchisors can choose not to provide such claims. When they do, they generally need a reasonable basis, written substantiation and disclosure in Item 19, with defined exceptions for existing-outlet records and supplemental information.
Buyers need to check whether figures describe sales or profit, which outlets were included and how closely those businesses resemble the proposed location. An average from established outlets may be a poor guide to a new business with different rent, competition and customer demand.
The FTC also recommends speaking to current and former franchisees about costs, training and ongoing assistance. Their experience can help buyers assess what happens after the sales process ends.
The contract’s renewal, transfer and termination provisions deserve the same attention as projected earnings. A business owner may eventually want to sell, leave the system or negotiate another term, and the agreement will help determine what those choices cost.
