Every February, the International Franchise Association releases its annual Franchising Economic Outlook — the most comprehensive snapshot of where the industry stands and where it’s headed. I’ve read this report every year for decades. In 2026, it tells a story that’s more nuanced than the headline numbers suggest, and worth understanding whether you’re considering buying a franchise, building one, or trying to grow one you already have.
Here’s what the data actually says — and what I think it means for you.
The headline numbers
The 2026 Franchising Economic Outlook, produced by FRANdata in partnership with the IFA, projects that franchised businesses will total approximately 845,000 establishments, employ nearly 8.9 million workers, and generate more than $920 billion in economic output in 2026. That’s more than 12,000 new franchise locations expected to open this year.
To put that in perspective: the franchise sector’s contribution to GDP is estimated to reach $558.4 billion in 2026, representing nearly 3% of the entire U.S. economy.
These are not small numbers. Franchising isn’t a niche business model — it’s a foundational pillar of the American economy, and 2026 marks its continued expansion even after a genuinely difficult 2025.
What 2025 actually looked like
Before getting to 2026, it’s worth being honest about where we’re coming from. The 2026 outlook follows a period of adjustment. According to the report, 2025 was a mixed year for franchising, marked by macroeconomic uncertainty, uneven consumer demand, and tighter credit conditions. In response, franchisors and franchisees shifted toward more disciplined execution — prioritizing unit-level efficiency, cost control, and selective growth over aggressive expansion.
Consumer spending growth slowed from 5.7% in 2024 to 3.7% in 2025, leading to some softer same-store sales and heightened top-line pressure.
I tell you this not to be pessimistic but because it matters for how you interpret the 2026 projections. The growth this year is measured and earned — not a sugar rush from pent-up demand. That recalibration positioned the franchise model to enter 2026 with greater resilience than many other business formats. That’s a meaningful distinction for buyers doing due diligence on specific brands.
The fastest-growing sectors — and what they tell you
Not all franchise categories are growing equally, and that gap is widening. Here’s the breakdown worth paying attention to.
Child services and commercial and residential services are projected to grow at 3.2%, nearly double the overall franchise establishment growth rate of 1.5%. Healthcare franchises, particularly in-home care, offer demographic tailwinds that will only strengthen over the coming decade.
Retail food, products, and services are expected to expand 2.3%, driven by value-oriented and non-discretionary spending. Health and wellness franchises are forecast to grow 2.1%, reflecting aging demographics and sustained focus on well-being. Full-service restaurants are projected to grow 2.0%, supported by higher-income consumers prioritizing experiential dining.
The QSR story is worth a separate note. For the first time since the pandemic, full-service restaurants are expected to outpace quick service restaurants in output growth. At QSR, consumer preferences are shifting toward “experiential dining” rather than purely value-driven offerings. That shift is real and structural, not a blip.
From my perspective as someone who has spent over 35 years watching franchise categories cycle through boom and bust: the home services, senior care, and child services categories have earned their current moment. They’re recession-resistant, demographically driven, and operationally suited to the franchise model. If you’re evaluating categories right now, these deserve serious consideration regardless of what the macro environment does next.
Where the growth is happening geographically
The top 10 fastest-growing states for franchising in 2026 are Texas, Florida, Georgia, Arizona, North Carolina, Colorado, Michigan, Utah, Ohio, and Maryland. Michigan, Ohio, and Utah have emerged as new entrants among the top 10 due to their comparative affordability, expansion potential, and meaningful opportunities for market leadership.
The Southeast continues to have the highest franchise presence, with the largest share of franchise businesses at nearly 30% of all locations, and establishment growth expected to rise 1.7%, surpassing 252,000 locations.
The emergence of Michigan, Ohio, and Utah as top-10 growth states is the more interesting story here. These markets offer something the Sun Belt has been losing: available territory, lower operating costs, and genuine first-mover opportunity in categories that are already saturated in Florida and Texas. If you’re evaluating where to plant a franchise, the Midwest and Mountain West deserve a harder look than they’ve historically gotten.
The multi-unit operator shift
This is the trend with the most significant implications for both buyers and franchisors, and it’s one that doesn’t get enough attention.
As of 2025, 19.3% of franchisees operate multiple units, but they collectively own 58.8% of all franchised locations. This concentration is particularly pronounced in service-based industries, where lighter capital requirements make scaling more feasible.
Read that again: roughly one in five franchisees now controls nearly three in five locations. The franchisee base is consolidating around sophisticated multi-unit operators who understand how to build portfolio-scale businesses.
For buyers, this is both encouraging and cautionary. It validates the franchise model’s ability to generate consistent, scalable returns. It also means that high-performing franchise opportunities face increasing competition from institutional buyers, making early-mover advantage more important than ever.
For franchisors, this trend demands a rethink of franchisee support infrastructure. A single-unit operator running one location has very different needs than a multi-unit operator managing a team of managers across five. The franchisors who are building support systems designed for their actual franchisee base — not the idealized single-unit owner of twenty years ago — are the ones positioned to attract and retain the best operators.
AI is no longer optional
A defining theme of the 2026 outlook is the acceleration of AI investment across franchise systems. What began as experimentation has become embedded in core operations, from franchise development and marketing to labor scheduling and inventory management. Larger systems are increasingly building internal AI capabilities, while mid-sized and emerging brands rely on AI-enabled third-party platforms integrated into their existing tech stacks.
The lodging sector saw approximately 250% increase in AI investment in 2025. That’s not a typo.
For franchisors who are still treating AI as a future consideration, the 2026 data is a clear signal that the window for catching up is narrowing. The brands building AI into their development pipelines, support systems, and unit-level operations are widening their advantage over those that aren’t. For franchisees evaluating brands, the technology infrastructure a franchisor has built — or hasn’t — is a legitimate due diligence question.
Private equity is accelerating
Private equity investing picked up in the third and fourth quarters of 2025 and will continue to accelerate in 2026. Franchising continues to attract capital due to predictable cash flows, recurring royalty income, and diversified unit-level risk.
For franchisors, this is a double-edged signal. On one hand, PE interest validates the model and creates real exit opportunities for founders who have built something worth acquiring. On the other hand, PE-backed competitors have capital and operational infrastructure that independent franchisors often can’t match on development spending or franchisee incentives.
For buyers, PE ownership of a franchisor warrants careful evaluation. Not all PE-backed systems are bad investments — many are excellent. But the incentive structures shift when a financial sponsor is involved, and understanding the holding period, exit strategy, and franchisee relationship under PE ownership is worth the due diligence time.
A tax environment that actually helps franchisees
One of the less-discussed tailwinds in 2026 is legislative. The One Big Beautiful Bill Act, signed into law, includes deductions impacting 73% of franchisors and 98% of franchisees. In 2026 alone, franchise businesses will be able to claim full deductions on approximately $27 billion in capital expenditures.
That’s a real, material improvement in franchise unit economics — particularly for capital-intensive concepts investing in equipment, buildouts, or technology. If you’re doing financial modeling on a franchise opportunity right now, this depreciation provision needs to be in your numbers.
What all of this means for you
If you’re considering buying a franchise: 2026 is a measured growth year, not a speculative bubble. The categories showing the strongest fundamentals — home services, senior care, child services — are driven by structural demand that won’t reverse. The geographic story is shifting toward the Midwest and Mountain West. And the tax environment is genuinely favorable for capital deployment. Do the work, choose carefully, and the timing is as good as it’s been in years.
If you’re a franchisor: The multi-unit operator trend demands that your support infrastructure keep pace with your franchisee base. AI investment is no longer a differentiator — it’s a baseline expectation. And the private equity environment means that well-built systems have real strategic value, but also real competition for the best franchisee candidates from better-capitalized brands.
If you’re thinking about franchising your business: The 2026 environment rewards brands with operational discipline, strong unit economics, and scalable support systems. The brands getting funded and expanding are the ones that can demonstrate consistent performance at the unit level. The window is open — but not for every concept.
The bottom line
The franchise industry is expected to grow steadily as consumers remain cautious, labor markets normalize, and financing conditions gradually improve. This is healthy for prospective franchisees because it suggests sustainable demand rather than speculative overexpansion.
I’d add one more thing: the 2026 data makes clear that franchising rewards preparation. The buyers who succeed this year will be the ones who entered the process with clear parameters, did rigorous due diligence, and matched themselves to a concept with genuine unit-level economics. The franchisors who succeed will be the ones who built the infrastructure to support the operators they already have before chasing the next sale.
That has always been the principle underlying in my book Five Pennies. And in 2026, the data agrees.
If you want to talk through what these trends mean for your specific situation — whether you’re buying, building, or growing — that’s exactly what I do at Helgerson Franchise Group. The first conversation is free.
Schedule time at calendly.com/hfgfranchise, text me at 941-399-1486, or use the contact form on this site.
Lonnie Helgerson, CFE, is the founder of Helgerson Franchise Group and VeteranOpportunity.com. He has founded six franchise systems, served on the IFA Board of Directors, and chaired the IFA VetFran Committee twice. He is a U.S. Army veteran and the author of Five Pennies and Buying a Franchise: Is it Right for Me?