Franchising 2026

USA Trends and Developments Contributed by: Carmen D. Caruso, Carmen D. Caruso Law Firm

Franchise Law in the United States 2026 Franchise and dealership lawyers in the United States stay busy. The retail and B2B markets where franchis - ing thrives face continued post-COVID-19 inflation - ary pressures, shifting customer behaviours, elevated costs for labour, construction, technology and supply chains, and competitive disruption. Franchisors and franchisees confront the same headwinds as their non-franchised competitors. In franchising, those pressures interact with erratic governmental regula - tion and the inherent tensions present in every fran - chise relationship. Current Business Trends and the Challenging Climate Franchising is a vital engine of entrepreneurship, small-business formation, and job creation. In its 2026 Franchising Economic Outlook, the International Fran - chise Association projected that: • franchise economic output will grow to USD921.4 billion from USD907.3 billion (1.6%); • franchise establishments will grow to approximate - ly 845,000 units from 832,521 (1.5%); • employment in franchised outlets will increase by more than 150,000 jobs (1.8%) to nearly 8.9 mil - lion; and • franchise GDP will grow by 1.8%, from USD549.9 billion to USD558.4 billion. Growth is concentrated in child services and com - mercial/residential (home) services, each projected at roughly 3.2%. The Southeast and Southwest remain the strongest regions, driven by population growth, relative affordability and business-friendly policies. The fastest-growing states include Texas, Florida, Georgia, Arizona, North Carolina, Colorado, Michigan, Utah, Ohio, and Maryland – with Michigan and Ohio contradicting the southward trend. Private equity and institutional capital remain active on the franchisor side as platform companies in home services, fitness and similar categories continue to consolidate. These developments could raise con - cerns for franchisees, whose success is not neces - sarily a top priority for new investors.

On the franchisee side, larger operators are raising capital to roll up smaller peers and build regional density with shared infrastructure. The same trend towards consolidation appears in non-franchised dealership channels (for example, farm equipment facing foreign competition). Many established sys - tems prefer fewer, better-capitalised multi-unit opera - tors, which reduces support burdens and can speed targeted development – though franchisors remain wary of franchisees becoming too big to fail. Suc - cessful franchisees increasingly diversify portfolios (for example, adding hotels to restaurant holdings). Relatedly, millennials and Gen Z continue to enter franchising, often seeking multi-unit ownership rather than the purchase of a job, which supports demand for newer, lower-cost or more flexible concepts. Franchising’s bullish aggregates coexist with unit- level pressure. Cost inflation, margin compression and uneven recovery across concepts, industries and markets create a challenging operating climate that tests the resilience of the franchise model. Growth is uneven as some systems have retrenched. Historic Tensions Exacerbated Experienced franchise lawyers must evaluate their cli - ents’ current business circumstances against historic tensions inherent in the franchise business model. Franchisees commonly assume unity of purpose with the franchisor – grow the brand and make money together. Problems often begin in the sales process when franchisors narrowly construe disclosure obli - gations, producing Franchise Disclosure Documents (FDDs) that inflate or distort financial performance representations, understate costs or failure rates, or create unrealistic expectations for under-capitalised candidates. Even successful relationships face stress over terms of five, ten or 20 years. Most post-sale disputes arise when: • the system struggles to adapt to competitive change; • franchisors pursue increased profits for themselves while reducing franchisee margins; or

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