Franchising has long been a popular pathway for entrepreneurs seeking to own a business while mitigating some of the risks of starting from zero. By leveraging an established brand and proven operating model, franchise owners can focus their efforts on executing a playbook for success.
As the franchising industry has grown and evolved, it has attracted a diverse range of investors and given rise to some of the world‘s most ubiquitous and influential brands. This in-depth guide will unpack the latest franchise industry statistics, trends, and success factors.
Whether you‘re seriously considering franchise ownership or an aspiring entrepreneur seeking to learn from this business model, read on for a data-driven look at the state of franchising in 2023 and beyond.
Franchise Industry Market Size & Growth
First, let‘s examine some of the top-level statistics that showcase the massive scale and continued expansion of the franchising industry, with a particular focus on the United States market:
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There are now 792,000 franchise establishments operating in the US across over 3,000 brands. This represents a 2% average annual growth rate over the last 5 years. (IFA)
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Franchising is forecast to continue expanding in 2023, with 17,841 new franchise locations expected to open their doors. Since 2014, franchise unit growth has averaged about 2.3% per year. (IFA / FRANdata)
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Franchised businesses currently employ 8.65 million people in the US, up 5% over 2021. Franchise employment is projected to grow another 2.3% in 2023, adding 194,000 new jobs. (IFA / FRANdata)
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In 2022, the total economic output of franchise businesses reached $826.6 billion, representing about 3% of US GDP. This figure is expected to grow to $870 billion in 2023. (IFA / FRANdata)
| Franchising Economic Impact | 2018 | 2019 | 2020 | 2021 | 2022 | 2023* |
|---|---|---|---|---|---|---|
| Establishments | 759974 | 773603 | 753770 | 774852 | 791479 | 809320 |
| *New Establishments % Change | – | 1.8% | -2.6% | 2.8% | 2.1% | 2.2% |
| Employment | 7834000 | 7865000 | 7519000 | 7824000 | 8252000 | 8446000 |
| *Employment % Change | – | 0.4% | -4.4% | 4.1% | 5.5% | 2.3% |
| Output ($B) | $713.2 | $746.5 | $670.3 | $819.4 | $826.6 | $869.3 |
| *Output % Change | – | 4.7% | -10.2% | 22.2% | 0.9% | 5.1% |
*2023 figures are projected
(Source: IFA / FRANdata)
The franchise industry demonstrated notable resilience during the pandemic-driven disruptions of 2020. While total units and economic output dipped, the industry bounced back strongly in 2021 and has posted year-over-year growth every year since.
It‘s also worth noting how franchising has fared vs. the broader small business sector during challenging times. In the depths of the Great Recession in 2008, franchise businesses outperformed independent small businesses in both revenue growth and employment growth by roughly 4% and 0.5% respectively. (FRANdata)
The relative stability of the franchise model is one reason it remains appealing to risk-averse entrepreneurs. With a systemic approach to site selection, operations, and marketing, franchise owners are often better equipped to weather economic headwinds.
Top Franchise Categories & Brands
Franchising spans 90 different industry categories, but certain business types tend to dominate the landscape in terms of sheer number of brands and locations. Here‘s a breakdown of where the most franchise activity is concentrated:
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Quick Service Restaurants (QSR) remain the single largest category, with over 21% of all franchise establishments. Some of the most well-known QSR brands include McDonald‘s, KFC, Burger King, Wendy‘s, Subway, Domino‘s Pizza, and Taco Bell.
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Full Service Restaurants (FSR) make up another 8.6% of franchise establishments. Leading FSR franchises include Denny‘s, IHOP, Applebee‘s, Golden Corral, Buffalo Wild Wings, and Outback Steakhouse.
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The Retail Products & Services category accounts for 10.7% of franchises. This includes brands like ACE Hardware, The UPS Store, GNC, Pearle Vision, and Bath & Body Works.
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Personal Services franchises in areas like fitness, massage, education, senior care, and beauty represent 10.2% of units. Top brands include Planet Fitness, Supercuts, Kumon, and Message Envy.
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Commercial & Residential Services make up 8.8% of establishments, led by franchises like Servpro, The Maids, Jani-King, and Molly Maid.
(Source: FRANdata)
Digging deeper into the best-known brands, the following table shows the top 10 US-based franchises ranked by their total number of international locations:
| Rank | Brand | Industry | US Units | Intl. Units | Countries |
|---|---|---|---|---|---|
| 1 | McDonald‘s | QSR | 13,683 | 26,348 | 102 |
| 2 | KFC | QSR | 4,161 | 20,839 | 135 |
| 3 | Burger King | QSR | 7,294 | 11,953 | 92 |
| 4 | 7-Eleven | Retail Store | 7,822 | 60,332 | 18 |
| 5 | Domino‘s Pizza | QSR | 5,951 | 11,206 | 83 |
| 6 | Pizza Hut | QSR | 7,306 | 10,213 | 97 |
| 7 | Ace Hardware Corp | Retail Store | 4,439 | 812 | 60 |
| 8 | Marriott International | Lodging | 4,598 | 1,392 | 93 |
| 9 | Hilton Worldwide | Lodging | 3,778 | 1,329 | 102 |
| 10 | Kumon Math & Reading | Education | 1,517 | 24,010 | 49 |
(Source: Franchise Times)
A few interesting observations jump out from this data on the biggest brands. First is the sheer global reach and scale that franchising enables, with the likes of McDonald‘s, KFC, and 7-Eleven operating in over 100 countries each.
Second is that for many top brands, international expansion is becoming an increasingly vital growth engine. 7-Eleven, for instance, now has over 8x more locations abroad than in the US. Even McDonald‘s, the quintessential American brand, now derives nearly 65% of its units and revenue from international markets.
Franchise Owner Profile & Success Drivers
Another way to analyze the franchise industry is through the lens of who franchise owners are and what traits and choices correlate with operating a successful franchise. Here‘s a data-driven look at the franchise owner population:
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The most common age range for franchise owners is 45-54 years old, representing 31% of owners. Another 25% are ages 34-44, and 20% are 55-64. (Guidant Financial)
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65% of franchise owners are men, while 35% are women. However, the share of female owners has grown 38% over the past decade. (FranConnect)
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62% of franchise owners have at least a bachelor‘s degree, and over 28% have a master‘s or doctorate degree. (FranConnect)
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The most common pre-franchise careers are business executive (21%), sales/marketing (18%), operations/logistics (11%), finance/accounting (8%), and engineering (7%). (Guidant Financial)
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14% of franchise owners are US military veterans, totaling over 66,000 veteran-owned franchise businesses. (IFA)
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The median initial investment to open a franchise is $200,000-500,000, although 37% of owners say they spent less than $150,000. The most common funding sources are retirement funds (38%) and bank loans (33%). (Guidant Financial)
What about the factors that tend to make franchise owners more successful and satisfied? Several studies and surveys of franchisees have identified these key success drivers:
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Conducting thorough due diligence on the brand, its financials, franchisee satisfaction, and territory viability before signing a franchise agreement.
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Having adequate working capital to cover initial operating losses and personal living expenses as the business ramps up. Undercapitalization is the #1 reason for franchisee struggles.
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Carefully site selection and buildout. Getting locked into a poor location lease is difficult to overcome.
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Developing a clear business plan and budget, mapping out revenue and expense assumptions to guide decision-making.
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Investing in marketing and customer acquisition early on to build a strong initial customer base and ongoing referral engine.
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Maintaining open communication with the franchisor to voice concerns, share ideas, and promptly address any deviations from brand standards.
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Building a reliable and high-performing staff and manager core, supported by competitive pay, good training, and a positive culture.
Ultimately, no two franchise owners will have the exact same experience or results, even within the same brand. But those who combine strong business fundamentals with the unique advantages of a proven franchise model tend to significantly outperform.
Franchise Growth & Outlook
Finally, let‘s examine some of the future-focused franchise industry trends and projections as the business model continues to evolve:
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Multi-unit ownership is rapidly becoming the norm. Among QSR franchisees, 48% own multiple units, and 80% of new units are now opening by existing owners. (FRANdata)
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Similarly, multi-brand franchising, where one owner operates units across several brands (sometimes even competitors) is on the rise. 43% of franchisees now say they operate more than one brand. (FRANdata)
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Emerging brands are a key growth driver. Over 300 companies start franchising their concept each year, and currently 50% of all franchise brands have under 100 units. (FRANdata)
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Social media marketing is now a core strategy for franchise brands. Over 90% use Facebook for local store marketing, followed by Instagram (78%), Twitter (66%), and YouTube (57%). (Precision Social Media)
–Delivery and mobile apps have reshaped the franchise landscape, especially for restaurant brands. Domino‘s now generates 75% of US sales via digital channels. Panera‘s delivery business grew by 150% in two years to reach nearly 30% of sales. (Company filings)
- Several franchise categories are poised for above-average growth over the next few years as consumer demand evolves post-pandemic: home improvement, health & fitness, pet care, child enrichment, and senior care to name a few. (Entrepreneur)
The future of franchising will be marked both by the continued dominance of major legacy brands and the rapid rise of new disruptive concepts. While the industry faces some regulatory uncertainty around joint-employer status and independent contractor classification, the franchise model has a proven track record of adaptation.
As long as entrepreneurs value a playbook for launching and growing a trusted brand, franchising will remain one of the most popular and powerful engines of business ownership. With the right research, planning, and execution, a franchise business can be a fulfilling pathway to profitable self-employment.
