Franchise Flashpoint: What’s the Biggest Threat to the Franchise Business Model?
Franchise Flashpoint is our candid look at what’s broken, changing, or misunderstood in franchising today, drawn from our monthly insider newsletter, Franchise Unfiltered.
Each issue breaks down the trends, deals, technologies, and tactics shaping franchise growth right now - without the hype or outdated talking points.
Franchising has never been short on challenges.
Over the years, the industry has weathered economic downturns, changing consumer behavior, labor shortages, and technological disruption. Yet as we move through 2026, a new wave of challenges is forcing franchisors to think carefully about the future of the business model.
Last month, we asked our community a simple question:
There are several well-documented threats to the franchise business model in 2026. Which major issue do you believe will make the biggest long-term impact on franchising?
The responses touched on everything from industry accountability to government regulation and the growing influence of artificial intelligence.
See the results here and read on for our insider take.
Ryan’s Take: Franchising’s Biggest Threat May Come From Within
Every year, roughly 300 to 350 brands decide to start franchising. Interestingly enough, roughly the same number decide to stop franchising.
Part of that is because franchising is hard. Building a successful franchise system requires strong economics, operational discipline, and long-term commitment. Not every business is built for that.
But there’s another factor that doesn’t get discussed enough. When a founder decides they want to franchise, their first stop is often one of the many firms promising to help them become a franchisor. In many cases, those firms are financially incentivized to sell the dream rather than challenge whether the business is truly ready to franchise.
That’s where problems begin.
Too many people enter franchising believing franchise fees alone will create a great business. The reality is much different. Successful franchise systems are built on strong unit economics and successful franchisees, not simply selling more territories.
I know this isn’t always a popular thing to say, especially to an audience of franchisors, but it’s the truth: elements of our own industry may represent the biggest long-term threat to the franchise model.
Many of the challenges we see downstream start with unrealistic expectations and poor system foundations upstream.
Zack’s Take: Government Policy Is the Biggest Risk
The franchise model only works if policymakers allow it to.
Over the last several years, franchising has faced increasing scrutiny from lawmakers, regulators, and government agencies. While some calls for greater transparency are reasonable, many proposed changes have come from people who don’t fully understand how franchising operates. That creates risk.
The more misinformation that exists around franchising, the easier it becomes for harmful legislation to gain traction. Labor policies, joint employer discussions, and regulatory overreach all have the potential to fundamentally alter how franchise systems operate.
Reasonable oversight is one thing. Policies that make it harder for franchisors and franchisees to run successful businesses are another.
For that reason, industry advocacy has never been more important. Organizations like the IFA continue to play a critical role in educating lawmakers and protecting the interests of franchise businesses across the country.
Simply put, if franchising wants to preserve the opportunities it creates, it needs a seat at the table when these conversations happen.
Jake’s Take: AI Will Reshape the Franchise Model
Artificial intelligence is already changing the way franchise brands operate, and we’re still in the early innings.
Brands are beginning to rethink everything from marketing and customer service to operations, finance, and franchise development. The way work gets done is changing rapidly, and franchisors are constantly evaluating how they can create more value for franchisees while improving efficiency throughout the system.
That’s why I believe AI will have the biggest long-term impact on the franchise model. But I think there’s another side to this conversation that’s often overlooked.
As AI continues to advance, there’s a real possibility that certain jobs become automated or significantly transformed. If that happens, more people may begin questioning the stability of traditional employment and start looking for ways to take greater control over their financial future.
Historically, franchising has been one of the most accessible paths to business ownership.
If workforce dynamics shift dramatically over the next decade, the number and type of people exploring franchise ownership could change as well.
That’s what makes AI so fascinating. It won’t just impact how franchise systems operate. It may fundamentally reshape who becomes a franchisee in the first place.
Final Thoughts
The biggest threat to franchising depends on who you ask.
Some believe the greatest risks come from within the industry itself. Others point to government regulation and public policy. And many see artificial intelligence as the force that will create the most change over the long term.
The reality is that all three deserve attention.
Franchising has always adapted to change, and that’s unlikely to stop anytime soon. The brands that thrive in the years ahead will be the ones that stay informed, remain flexible, and continue focusing on what matters most: creating successful outcomes for franchisees.
That’s a future worth protecting.
Want More Industry Insights?
This conversation is just one example of what we share in Franchise Unfiltered, our monthly newsletter for franchisors who want real perspective on what’s changing, what’s working, and what actually matters in franchising right now, including:
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