2026 U.S. Franchise Financial Benchmark Report: Growth, Costs & Unit Economics

The U.S. franchise sector is getting larger in 2026. The more important question for franchise operators is whether individual locations are becoming financially stronger at the same time.

The International Franchise Association projects approximately 845,000 franchise establishments operating in the United States by the end of 2026, up from 832,521 in 2025. Total franchise economic output is projected at $921.4 billion, compared with $907.3 billion in 2025.

That represents approximately 1.5% growth in establishments and 1.6% growth in economic output.

At first glance, those numbers tell a straightforward growth story. Looking at them together, however, reveals another useful perspective.

Based on QMK Consulting’s calculation using IFA’s published figures, economic output per franchise establishment moves from approximately $1.0898 million in 2025 to $1.0904 million in 2026—a nominal increase of only about 0.05%.

This is not a measure of average franchise-unit revenue or profit. IFA’s economic-output figure is a broad economic measure covering the franchise sector. The calculation is useful for a different reason: it demonstrates that systemwide expansion can occur even when the economic output associated with each establishment changes very little.

For franchisees, franchisors and multi-unit operators, growth therefore needs to be evaluated at two levels:

How quickly is the system expanding?

and

What is happening financially inside each operating unit?

2026 Franchise Financial Snapshot

*QMK Consulting calculation based on the 2025 and 2026 establishment and economic-output figures published in the International Franchise Association’s 2026 Franchising Economic Outlook. Economic output per establishment should not be interpreted as average unit sales, revenue or profitability.

The distinction matters particularly for operators moving from one location to several. Adding units can increase consolidated revenue while simultaneously introducing weaker margins, heavier debt obligations, greater working-capital requirements and more complex financial controls.

The number of units alone does not tell management whether expansion is creating value.

Growth Can Hide Weak Unit Economics

Consider a three-location operator:

Viewed only at the consolidated level, a 12% operating margin may appear acceptable.

But Unit B is performing far below the other two locations.

That gap could originate from many places: staffing inefficiency, declining traffic, higher occupancy costs, unfavorable product mix, poor inventory control, excessive discounting, local marketing performance, overtime, revenue leakage or other operating differences.

The point is not that a 6% margin is universally poor. Different franchise concepts have different economics.

The point is that consolidated reporting can conceal material variation between units.

A multi-location operator, therefore, needs financial reporting capable of answering questions such as:

• Which locations are improving?

• Which locations are deteriorating?

• Is revenue growth translating into additional profit?

• Are labor and direct costs moving differently across units?

• Which location is consuming disproportionate cash?

• Are weaker units being supported by stronger ones?

• Is the next location likely to improve or dilute portfolio economics?

Without location-level reporting, those questions become much harder to answer.

Restaurant Economics Show Why Small Changes Matter

Restaurant franchises provide a useful illustration because food and labor consume a large portion of every sales dollar.

The National Restaurant Association’s 2026 analysis places both food and labor costs at roughly 33% of restaurant sales apiece.

The cost environment also remains substantially above pre-pandemic levels. By mid-2026, average hourly earnings for restaurant employees were approximately 41% higher than in February 2020, while wholesale food prices were approximately 35% higher.

At the same time, 33% of restaurant operators reported that their business was not profitable during the first half of 2026.

The association also reduced its inflation-adjusted restaurant sales-growth forecast for 2026 from 1.3% earlier in the year to approximately 0.8%.

These figures help explain why higher sales do not necessarily result in stronger margins.

A restaurant can generate more dollars of revenue than it did a year earlier while retaining less profit if payroll, ingredients, insurance, occupancy and other expenses increase faster than the additional gross profit generated by those sales.

For franchise operators, nominal revenue growth should therefore never be reviewed in isolation.

Restaurant Financial Benchmarks: Recent Industry Reference Points

The latest restaurant benchmarking data offers a useful view of how major operating costs are behaving across the industry. The National Restaurant Association’s 2025 operating study incorporates results from more than 900 restaurant businesses across the United States, giving us a broad comparison base for food, labor, occupancy and profitability metrics.

The figures below relate primarily to 2024 operations. They are useful reference points—not universal financial targets.

Different concepts, geographies, service models, sales volumes, lease structures and operating strategies can produce very different cost ratios.

Food and Non-Alcoholic Beverage Costs

Median food and non-alcoholic beverage costs represented approximately:

• 32.0% of sales for full-service restaurants

• 32.4% of sales for limited-service restaurants

Sales volume was associated with meaningful variation among full-service respondents.

Restaurants generating at least $2 million in annual sales reported median food and non-alcohol beverage costs of approximately 31.0% of sales, compared with 33.7% among respondents below $2 million.

That does not mean larger restaurants are automatically more profitable. It does demonstrate how operating scale can affect individual cost relationships.

Labor Costs

Median salaries, wages and employee benefits represented approximately:

• 36.5% of sales for full-service restaurants

• 31.7% of sales for limited-service restaurants

The difference between profitable and loss-reporting respondents was notable.

Among full-service restaurants reporting a pre-tax profit, median labor costs were approximately 34.2% of sales.

Among full-service respondents reporting a loss, the median was approximately 42.9%.

For limited-service restaurants, profitable respondents reported median labor costs around 30.0%, compared with approximately 34.1% for loss-reporting respondents.

These figures do not establish a universal labor target or prove that labor percentage alone determines profitability.

They demonstrate why a movement of only a few percentage points can become financially significant when labor represents one of the largest expenses in the business.

Occupancy Costs

Median occupancy costs represented approximately:

• 5.7% of sales for full-service restaurants

• 5.2% of sales for limited-service restaurants

Location also mattered.

Among limited-service respondents, median occupancy expense was approximately:

• 6.0% in urban or city-center locations

• 5.0% in suburban locations

• 3.2% in small-community or rural locations

For franchise expansion decisions, this is an important reminder.

Two proposed locations with similar projected sales can produce substantially different economics if their occupancy obligations are materially different.

Pre-Tax Profitability

Among restaurants participating in the Association’s operating-data study, median income before taxes represented approximately:

• 2.8% of sales for full-service restaurants

• 4.0% of sales for limited-service restaurants

These figures reinforce how narrow the margin for operating error can be in restaurants.

A change of two percentage points in labor, food or another major expense category can be economically meaningful when the underlying pre-tax margin is only a few percentage points.

The National Restaurant Association cautions that its operating ratios are intended for comparison and management analysis rather than as prescribed targets.

That is also how QMK believes financial benchmarks should be used:

A benchmark should identify where to investigate—not dictate the answer before the business is analyzed.

What Current Franchise Disclosures Show About Recurring Fees

The royalty percentage is one of the most visible numbers in a franchise opportunity, but it does not necessarily represent the full ongoing financial commitment associated with operating under a franchise system.

Under the Federal Trade Commission’s Franchise Rule, Item 6 of the Franchise Disclosure Document covers recurring or occasional fees associated with operating the franchise, such as royalties, advertising fees and certain other charges.

The broader franchise agreement and disclosure document can also contain local-marketing requirements, technology charges, minimum payments and other financial obligations that affect unit economics.

To illustrate the differences between fee structures, QMK Consulting reviewed publicly available 2026 disclosure information from selected franchise systems across several industries.

The examples below are intended to show how structures can differ. They are not a random sample and should not be treated as estimates of the U.S. franchise industry as a whole.

Selected 2026 Franchise Fee Examples

*9Round’s 2026 disclosure applies minimum monthly amounts: the royalty is the greater of $600 or 6% of net sales, while the Brand Building Fund contribution is the greater of $250 or 2% of net sales.

These percentage figures still do not show the complete recurring cost structure.

For example, 9Round also discloses a $499 monthly technology fee and a local advertising requirement based on the greater of a stated percentage of revenue or a minimum spending amount.

Orangetheory’s disclosure likewise includes a local advertising requirement in addition to its royalty and central brand contribution.

Home Instead’s current fee structure includes recurring technology and other system-related charges beyond the basic royalty and brand-fund percentages.

The practical lesson is straightforward:

The headline royalty rate is only one part of the financial analysis.

Why the Royalty Rate Can Be Misleading on Its Own

Consider a franchise with a 6% royalty.

An operator looking only at that number could conclude that the primary recurring franchise burden is approximately six cents of every revenue dollar.

But other obligations may also apply, including:

• central brand or advertising contributions;

• mandatory local advertising;

• recurring technology fees;

• cooperative marketing obligations;

• minimum royalty payments;

• software charges;

• required support services; or

• other recurring system expenses.

Some of these costs are tied to sales, while others are charged as fixed amounts.

That distinction becomes particularly important for lower-volume units.

A fixed monthly technology charge represents a smaller percentage of revenue for a high-volume location than it does for a location generating substantially less revenue.

Accordingly, comparing franchise systems only by royalty rate can produce an incomplete financial analysis.

A better approach is to separate ongoing obligations into three categories:

1. Percentage-Based Franchise Costs

Royalties, advertising funds and other charges are calculated from revenue.

2. Fixed Recurring Franchise Costs

Technology, software, support or other scheduled charges.

3. Required Operating Expenditures

Local advertising or other spending required under the franchise agreement, even when the money is not paid directly to the franchisor.

Separating the costs this way provides a clearer view of the unit’s recurring franchise obligations.

Eight Financial Metrics Multi-Unit Franchise Operators Should Track

Industry benchmarks provide context. Management decisions still require financial information specific to the operator, concept and location.

The following eight metrics provide a practical starting framework.

1. Same-Store Revenue Growth

Formula:

(Current comparable-unit revenue − prior comparable-unit revenue) ÷ prior comparable-unit revenue

Total company revenue can increase because new locations were opened or acquired.

Same-store growth asks a different question:

Are established locations themselves growing?

For multi-unit businesses, management should generally understand both total revenue growth and comparable-unit performance.

2. Gross Margin

Formula:

(Revenue − direct cost of sales) ÷ revenue

Revenue growth is less valuable if the additional sales arrive with deteriorating gross economics.

Monitoring gross margin by unit helps distinguish productive growth from growth that is becoming increasingly expensive to generate.

3. Labor as a Percentage of Sales

Formula:

Total labor cost ÷ net sales

Labor should be monitored over time and, where useful, by location, operating period, department or shift.

A consolidated labor percentage may appear stable while a single unit develops persistent scheduling, overtime or productivity problems.

4. Prime Cost

For restaurant operators, prime cost generally combines:

Cost of goods sold + labor costs

It may also be expressed as a percentage of sales.

Because food and labor together absorb a large share of restaurant revenue, relatively modest deterioration in either category can place substantial pressure on operating profit.

Prime cost should therefore be analyzed as a trend rather than treated as a one-time number.

5. Occupancy Cost Ratio

Formula:

Occupancy-related costs ÷ net sales

This ratio can help compare locations and evaluate prospective sites.

A lease that appears manageable in dollar terms can become burdensome if the location’s sales volume does not support the required occupancy expense.

6. Location-Level Operating Profitability

Every location should have financial reporting detailed enough to show how much economic value it contributes to the portfolio.

Depending on the business, management may use:

• unit operating income;

• contribution margin;

• four-wall EBITDA; or

• another consistently defined location-level profitability measure.

Consistency is essential.

If different locations calculate profitability differently, comparisons become much less useful.

7. Total Franchise-System Cost Burden

Instead of monitoring the royalty rate alone, operators can evaluate:

Recurring franchise-system costs ÷ unit revenue

The calculation should be structured carefully so management can see separately:

• royalties;

• central advertising contributions;

• local marketing requirements;

• recurring technology charges;

• cooperative advertising obligations; and

• other material recurring system costs.

Separating these components helps management understand not only how much the franchise system costs, but what is driving the cost.

8. Operating Cash Flow and Debt Capacity

Profit does not automatically mean that cash is available for expansion.

Operators considering another location should evaluate cash after accounting for:

• operating requirements;

• taxes;

• debt payments;

• capital expenditures;

• working capital;

• owner distributions; and

• the cash needed to support the new location before it reaches a stable operating level.

A profitable portfolio can still become financially strained when expansion absorbs cash faster than mature units generate it.

The QMK Multi-Unit Expansion Readiness Framework

Opening another unit should be treated as a capital-allocation decision, not simply as the next stage of growth.

QMK’s framework evaluates five areas.

1. Existing Unit Strength

Before adding another location, determine whether the existing portfolio is consistently healthy.

Review:

• unit-level profitability;

• comparable revenue trends;

• gross margin;

• labor;

• cash generation;

• recurring operating exceptions; and

• performance differences between locations.

Expansion should not become a way of distracting management from weaknesses already present in the portfolio.

2. Liquidity

Determine how much cash remains available after normal operating needs, taxes, debt service and expected capital expenditures.

The opening investment is only part of the funding requirement.

New units can require additional liquidity while sales build, staff are trained and operations stabilize.

3. Ramp-Up Economics

A new location should not automatically be modeled as though it will immediately perform like a mature unit.

A more useful forecast separates:

Opening → Ramp-Up → Stabilization → Mature Operations

This allows management to estimate how long the new location may consume cash before making a meaningful contribution to the portfolio.

4. Downside Capacity

A forecast becomes more useful when it tests what happens if assumptions are wrong.

Model scenarios such as:

• slower-than-expected sales;

• higher labor expense;

• increased occupancy cost;

• opening delays;

• additional working capital;

• higher input costs; or

• margins below the base forecast.

The goal is not to predict every possible outcome.

It is to determine whether the business can absorb a reasonable setback without destabilizing the rest of the portfolio.

5. Portfolio Impact

Lastly, consider the new location in the context of the organization as a whole.

Expansion can increase revenue while also:

• reducing liquidity;

• adding leverage;

• increasing administrative complexity;

• stretching management resources; and

• creating additional financial-control requirements.

The question is not only:

“Can we open another location?”

It is also:

“Will another location strengthen the economics of the portfolio after the additional risk, capital and operating requirements are considered?”

Franchise Financial Health Scorecard

Multi-unit operators can use a recurring scorecard to identify trends before they become larger financial problems.

The scorecard becomes valuable when it is reviewed consistently.

A number that remains within budget may require little attention. A number moving unfavorably for several consecutive periods may deserve investigation even if it has not yet crossed a formal threshold.

Direction can be as important as the current value.

What the 2026 Data Means for Franchise Operators

The franchise sector is expected to continue expanding in 2026.

IFA projects approximately 845,000 establishments, $921.4 billion in economic output and nearly 8.9 million franchise jobs.

At the same time, the operating environment remains demanding in industries such as restaurants, where food and labor costs remain elevated and a significant share of operators continue to report profitability pressure.

Those facts can coexist.

Franchise-system growth and individual-unit financial performance are not the same thing.

For a single-unit operator, that distinction affects day-to-day financial management.

For a multi-unit operator, it becomes even more important because strong locations can conceal weak ones when results are consolidated.

For an operator considering another unit, it affects whether expansion creates durable economic value or merely increases revenue and complexity.

The financial advantage therefore comes from visibility:

knowing where margin is improving, where cash is being consumed, which units are producing economic value, which costs are moving in the wrong direction, and whether the portfolio can support its next stage of growth.

That is the difference between measuring expansion and measuring financially sustainable expansion.

Methodology & Data Notes

This report combines authoritative public industry information, publicly available franchise-disclosure information and original calculations and analytical frameworks prepared by QMK Consulting.

Franchise-Sector Data

Franchise establishment, employment, GDP and economic-output projections are drawn from the International Franchise Association’s 2026 Franchising Economic Outlook, conducted by FRANdata.

The approximately 0.05% change in economic output per establishment is a QMK Consulting calculation derived from IFA’s published 2025 and 2026 establishment and economic-output figures.

It is not an IFA-reported metric and should not be interpreted as average franchise sales or profitability.

Restaurant Benchmarks

Restaurant operating ratios are based on the National Restaurant Association’s 2025 Restaurant Operations Data Abstract and related 2025–2026 Restaurant Economic Insights publications.

The underlying operations data abstract uses information from more than 900 restaurants nationwide.

The restaurant figures included in this report are comparative operating data. They are not intended to establish universal targets for individual restaurants or franchise systems.

Franchise Fee Analysis

The franchise fee examples use publicly available 2026 Franchise Disclosure Document information for selected franchise systems across food and beverage, fitness, personal services and senior care.

The brands were selected to illustrate differences in recurring fee structures and were not randomly sampled.

For that reason, QMK does not calculate or present the selected examples as an estimate of the average or median cost structure across the U.S. franchise industry.

The table focuses on stated royalty and central advertising or brand-fund percentages for comparison. Individual systems may also impose minimum payments, fixed technology charges, local advertising requirements, cooperative obligations and other recurring costs.

Anyone evaluating a specific franchise opportunity should rely on the current Franchise Disclosure Document, franchise agreement and appropriate professional review rather than industry benchmark information alone.

Primary Sources

• International Franchise Association — 2026 Franchising Economic Outlook

• National Restaurant Association — 2025 Restaurant Operations Data Abstract

• National Restaurant Association — 2025–2026 Restaurant Economic Insights

• Federal Trade Commission — Franchise Rule, 16 CFR Part 436

• Publicly available 2026 Franchise Disclosure Document information for the franchise systems used as illustrative fee examples.