Why Understanding Franchise Unit Growth is Critical for Your Expansion Success
Franchise unit growth is the increase in a system’s franchise locations over time. For business owners considering franchising, understanding these metrics is essential for making informed expansion decisions and setting realistic growth targets.
Key Franchise Unit Growth Metrics:
- Gross Growth: Total new units opened
- Net Growth: New units minus closed units (the true measure of health)
- Growth Rate: Percentage increase year-over-year
- Unit Economics: Revenue and profitability per location
- Franchisee Turnover: Rate of franchisee exits from the system
The franchise industry is experiencing strong momentum. In 2025, franchise establishments are projected to increase by more than 20,000 units, or 2.5%, to 851,000 total units. This growth is set to outpace the broader U.S. economy, which is projected to increase by only 1.9%.
Yet behind these promising numbers lies a crucial reality: not all growth is created equal. While impressive gross expansion numbers look good on paper, high franchisee turnover can be a red flag indicating systemic problems. Net growth, which accounts for closures, is the true measure of a franchise system’s health.
The franchise development pipeline has also become more sophisticated. Multi-brand franchisees now control large portions of major systems, and modern brands are scaling faster than ever. For example, brands like Crumbl and 7Brew reached 100 operating units within just three years, a milestone that took older brands like Quizno’s 14 years to achieve.
I’m Monique Pelle-Kunkle, Vice President of Operations at Franchise Genesis. I’ve guided many business owners through successful franchise unit growth strategies, including scaling one franchise to over 100 locations in its first year. My experience shows that sustainable growth requires the right metrics, systems, and strategy—which we’ll explore in this guide.
The 2025 Economic Outlook for Franchise Expansion
For business owners considering franchising, now is an incredible time to explore this growth strategy. Recent research from the International Franchise Association (IFA) and FRANdata highlights an exciting future for the industry.
The 2025 franchise forecast shows franchise establishments growing by over 20,000 units (a 2.5% increase) to 851,000 total units nationwide. This growth rate outpaces the broader U.S. economy, projected to grow by just 1.9%. Franchising is also expected to add 210,000 jobs, bringing total franchise employment to over 9 million. You can find more details in the 2025 Franchising Economic Outlook.
Financially, total franchise output is projected to exceed $936.4 billion in 2025, a 4.4% jump from 2024. This represents a massive and growing market for new franchisors. This optimism is driven by a stabilizing labor market, easing interest rates, and rising consumer confidence, positioning the adaptable franchise model for continued growth.
The fastest-growing industries are personal services and retail food, expected to grow by 4.3% and 3.5% respectively. Businesses like fitness centers, spas, and quick-service restaurants are on particularly fertile ground for franchise unit growth.
Geographically, the regional growth hotspots are the Southeast and Southwest, with forecasted output growth of 6.2% and 8.5% respectively. These regions offer business-friendly policies and expanding populations that support franchise expansion.
This economic outlook presents a golden opportunity. With strong market conditions and consumer demand, now is the time to consider if franchising is right for your business. Explore Why You Should Franchise to see how these favorable conditions can support your expansion goals and help you transform your business into a thriving franchise system.
Measuring What Matters: Key Metrics for Sustainable Franchise Unit Growth
While the economic outlook is bright, not all franchise unit growth is created equal. It’s easy to get caught up in impressive-sounding numbers that don’t tell the real story of a franchise system’s health.
The most important distinction is between gross growth (total new locations) and net growth (new units minus closures). Net growth is where the truth lives. If you open 50 new locations but 40 close, your actual growth is only 10 units, and the closures can damage your brand’s reputation.
Franchisee turnover is the silent killer of sustainable growth. When franchisees leave, you lose royalties, and your brand loses credibility. A healthy system has minimal turnover, while high turnover is a major red flag. This is why focusing on unit economics—the profitability of a single location—is so critical. When your unit economics are solid, you attract serious investors and build the foundation for sustainable growth that benefits everyone. Learn more by Understanding the Key to Building a Thriving Franchise Network.
Decoding the FDD for Viable Franchise Unit Growth
The Franchise Disclosure Document (FDD) is a critical transparency tool required by the FTC. It builds trust and protects everyone involved. Key sections directly impact your franchise unit growth potential:
- Item 7 (Initial Investment): This must be a realistic range of costs to get a location running. Don’t lowball this number; undercapitalized franchisees are a recipe for failure. We recommend franchisees have at least six months of operating expenses in reserve.
- Items 5 & 6 (Initial & Recurring Fees): Your initial fee (Item 5) covers the right to use your brand and systems. Recurring royalty and marketing fees (Item 6) fund the ongoing support, innovation, and brand messaging that make your system valuable.
- Item 19 (Financial Performance Representations): This is where you share financial data from existing locations. Transparency is key. Including data from average and even lower-performing units builds credibility and shows you understand the real challenges of the business.
The FTC’s Franchise Rule provides clear guidelines on what must be disclosed, helping you create an offering that is both compliant and compelling.
Benchmarking Your Potential for Franchise Unit Growth
How do you know if your growth goals are realistic? Benchmarking against the industry is key. In 2023, the average franchise brand opened just three new units, while the fastest-growing brands opened as many as 45.
The speed of expansion has also changed dramatically. Modern brands like Crumbl and 7Brew reached 100 units in just three years, a milestone that took older brands 14 years. This is due to better systems and clearer unit economics.
At Franchise Genesis, we help you determine where your brand fits. The key is setting ambitious but achievable goals based on your business model, market potential, and ability to support new franchisees. Your franchise unit growth strategy must be built on a solid foundation of proven economics and scalable systems. When these fundamentals are right, growth becomes inevitable. If you’re ready to explore what realistic growth looks like for your business, we invite you to find more at Do You Want to Grow Your Business?.
Strategic Pathways to Accelerate Unit Expansion
Choosing the right expansion strategy is critical to your success. The two primary pathways to franchise unit growth are franchise conversions and new builds, each with distinct advantages.
| Feature | Franchise Conversions | New Builds |
|---|---|---|
| Cost | Lower capital investment (repurposes existing assets) | Higher capital investment (construction, land) |
| Timeline | Faster market entry (bypasses permitting, construction) | Longer development cycles (permits, construction) |
| Staffing | Retains existing staff, provides an already trained workforce | Requires recruiting and training entirely new staff |
| Brand Integration | Adapts existing space, potential for brand identity challenges | Full control over design, consistent brand aesthetic |
Franchise conversions offer incredible efficiency. You give an existing, independent business a makeover with your proven system, repurposing real estate that already has foot traffic. The lower capital investment and faster market entry make this an accessible option for franchisees. A major benefit is retaining existing staff, which is invaluable in today’s competitive labor market. For example, Hand & Stone Massage and Facial Spa successfully used this model to expand.
New builds, on the other hand, provide complete creative control, ensuring every detail reflects your brand. While they require more capital and time, new builds are ideal for entering untapped markets or when your operations require a custom-built space. The smartest franchisors use a hybrid approach, leveraging conversions for rapid growth and new builds for strategic entries. There are Franchise Opportunities in All Industries that can benefit from these strategies.
Mastering the Franchise Conversion Process
A successful conversion involves more than changing the sign. It requires a detailed process:
- Thorough Evaluation: Assess the existing business’s location, customer base, financials, and alignment with your target market.
- Brand Identity Alignment: Ensure every customer touchpoint, from layout to service flow, reflects your brand’s values and aesthetic.
- Customized Training and Support: Develop training that respects the operator’s experience while ensuring they master your unique systems and protocols.
This strategic approach is a cornerstone of effective Franchise Sales & Marketing.
Fueling Growth with Multi-Unit Operators
A major trend in franchising is the rise of sophisticated multi-unit operators. These seasoned professionals accelerate franchise unit growth by bringing scalable infrastructure, proven experience, and significant financial resources.
In major systems like Domino’s, a small percentage of franchisees control a majority of the locations. These operators understand how to scale efficiently, reducing risk and ramp-up time for the franchisor. They often sign multi-unit development agreements (MUDAs), committing to open several locations and ensuring comprehensive market coverage. For multi-brand operators, your franchise can be a strategic addition to their portfolio.
Attracting these high-performing operators requires demonstrating strong unit economics and significant ROI potential. When you partner successfully with multi-unit operators, you build a resilient network that drives exponential growth. This is integral to how we Transform Leads into Loyal Franchisees with a Proven Sales Strategy.
Building the Engine: Systems and Support for Sustainable Growth
As your franchise system grows, what worked for five units can break down at fifty. This scaling challenge is where many business owners grapple with operational strain and resource constraints.
Many franchisors get stuck in a “chicken and egg problem”: you need to invest in better systems and staff to support growth, but you need that growth to fund the investment. Over half of North American franchisors have 20 or fewer units, often because they lack robust systems. Without adequate support, even committed franchisees will hesitate to expand.
The goal is to reach “royalty efficiency,” where the royalties you collect exceed your operating expenses. At this point, your system becomes self-sustaining and can fund its own continued franchise unit growth.
The Role of a Cloud-Based Operations Manual
A dusty three-ring binder won’t work for a growing franchise. A comprehensive, cloud-based operations manual is the central nervous system of your system, ensuring consistency as you scale. It gives every franchisee, regardless of location, immediate access to the latest procedures and standards.
A digital manual makes it manageable to ensure consistency. Key features include:
- Role-specific content: Team members see only the information relevant to their jobs.
- Interactive elements: Checkpoint routines and training videos improve compliance and understanding far better than static text.
Investing in a digital operations system is foundational for sustainable growth. We help businesses develop a Franchise Operations Manual that empowers their network.
Unifying the Network with Modern Communication
As franchise unit growth accelerates, communication becomes more complex. A unified communications platform is essential to avoid confusion and missed messages. It allows for:
- One-to-one messaging: Your support team can provide direct, personalized coaching to franchisees.
- Group collaboration: Franchisees can learn from each other in regional or specialized groups.
- Company-wide announcements: Critical information reaches everyone simultaneously and consistently.
This unified approach is crucial for supporting franchisees during transition, building their confidence in your brand. When franchisees feel supported and connected, they become your best advocates for future growth.
Conclusion
As we’ve explored, franchise unit growth is more than just opening new locations. It’s a sophisticated balance of strategy, metrics, and unwavering support that determines whether your expansion succeeds.
The 2025 outlook is encouraging, with franchising set to outpace the U.S. economy. But as I learned scaling one franchise to over 100 locations in its first year, the real success lies beneath the surface-level statistics.
Your focus must be on net growth. A healthy system is one where doors stay open. This is achieved through smart strategies like leveraging conversions for rapid entry and partnering with experienced multi-unit operators for scalable growth. Understanding the details of your FDD is equally crucial for attracting quality partners.
Most importantly, building scalable systems is non-negotiable. A cloud-based operations manual and a unified communications platform are not luxuries; they are the lifelines that ensure consistency and support across a growing network.
At Franchise Genesis, we’ve seen how combining strategic planning with robust systems transforms a single business into a thriving franchise network. From our base in Huntersville, North Carolina, we guide businesses through every step of this journey.
If you have a proven business concept and are wondering if franchising is your path to growth, you don’t have to steer this complex landscape alone. The market conditions are favorable, and with the right partner, your franchise unit growth aspirations can become a reality.
Ready to grow your business? Explore our services for franchisors.