An open conversation about profitability, pressure, and the future of responsible franchising.

During the past two years of my forty-plus years in and around franchising, I have felt a shift that is difficult to dismiss. Franchising has always carried a natural tension between promise and reality, but rarely has that tension felt this persistent, this widespread, or this quietly unsettling. What I am seeing now is not a single broken link in the chain, nor a few isolated business failures that can be rationalized away as “operators who did not execute.” What I am seeing is a growing sense that the balance the model relies upon is being tested in ways the industry has not fully reconciled, and perhaps has not fully wanted to.

That context is what made this past week’s news so resonant. A 100+ unit franchisee of Popeyes filing for bankruptcy protection is not, by itself, a verdict on a brand or on franchising as a whole. But placed alongside what has unfolded over the last two years, it feels less like an anomaly and more like another marker in an emerging pattern. Distress has surfaced across systems of every size and stage. Large multi-unit operators with sophisticated infrastructure. Smaller franchisees who followed the playbook precisely. Legacy brands and emerging concepts alike. The stories are not identical, but the undertone is familiar: the economics have become harder, the margin for error thinner, and the path to stability less certain than the model has historically implied.

And then there are the quieter developments that rarely make headlines. Franchisors closing corporate locations. Emerging franchise systems quietly disappearing when capital tightens, when development pipelines stall, or when early optimism meets the reality of operations. What often goes unspoken is what happens to franchisees in those moments. They do not disappear when a brand contracts or fails. They remain attached to leases, loans, equipment, staffing obligations, personal guarantees, and in many cases, personal identity. When a franchise system falters, it does not simply “fail.” It leaves people behind.

The instinctive reaction in franchising, especially among those who have built careers on the model, is to search for blame and then defend the model against that blame. To point at inflation, labor volatility, the cost of goods, supply chain disruptions, third-party delivery, interest rates, changing consumer behavior, rising real estate costs, and increased regulatory and compliance burdens. All of those forces are real. But the industry has always faced headwinds. The deeper question is why those headwinds now feel capable of breaking operators at scale, including those who are experienced, well-capitalized, and once considered “the best of the best.”

Because franchising, stripped to its essentials, is an economic arrangement. When unit-level economics no longer work consistently, everything else becomes secondary. Support, marketing, culture, brand strength, operational excellence, each matters, but all of them ultimately feed a single outcome: profitability. Not theoretical profitability. Not “on paper.” Not “once the next three stores open.” Real profitability that can withstand shocks, absorb reinvestment, pay down debt, and provide a return worthy of the risk.

Yes, there are profitable franchisors and profitable franchisees. Some are thriving. Some are scaling responsibly. Some are generating exceptional returns. Those examples deserve recognition and study. But they also risk masking the more uncomfortable truth: a significant portion of franchising appears to be living in a state of fragility. Units that are technically open but financially strained. Owners deferring reinvestment because the math no longer supports it. Operators compensating for margin compression with longer hours, reduced staffing, or personal sacrifice. Businesses continuing not because the model is healthy, but because exiting feels worse than enduring.

The question that rarely gets asked publicly is how large that middle has become. Not the winners. Not the failures. The wide swath of franchising that is barely holding together. How many franchisees are one unexpected expense away from serious trouble? How many are “profitable” only if the owner works sixty or seventy hours a week, effectively subsidizing the business with labor the P&L does not reflect? How many have stopped paying themselves appropriately just to keep the doors open? How many are staying in the game because they have too much personally guaranteed debt to walk away?

Now ask the next question, the one franchising tends to avoid: if a material portion of franchisees are living like that, what does it say about the health of the model, not in its best-case form, but in its average form?

Because franchising is not judged by its outliers. It is judged by its median. The “middle” is the industry. If the middle is strained, the industry is strained.

That brings me to another question that feels uncomfortable, but necessary to ask. At what point are there simply too many franchise brands? There are now more than 4,000 franchise concepts competing for the same franchisees, the same territories, the same real estate, the same labor pool, and the same consumer attention. Entire segments feel crowded to the point of indistinguishability, brands differentiated more by marketing language than by true strategic advantage. We see the same categories proliferate: chicken, burgers, pizza, coffee, smoothies, cleaning, restoration, lawn care, senior care, fitness, pet services, tutoring, and countless others. Many are good concepts. Some are exceptional. But the marketplace can only support so many “good” concepts before the fight becomes less about excellence and more about survival.

This is not an anti-capitalism argument. I believe in capitalism and the American Dream deeply. Markets should decide. Entrepreneurs should be free to build. Innovation deserves room to breathe. But believing in capitalism does not mean ignoring the consequences of oversaturation. Oversaturation has a way of turning opportunity into a zero-sum contest where only the strongest balance sheets win, while the average operator gets squeezed.

So the question is not whether there are too many brands in the abstract. The question is this: have we normalized launching franchise systems without fully stress-testing unit economics under real-world conditions? And are we honest about what “success” looks like for the average franchisee in a crowded segment?

If a concept requires best-in-class execution just to be marginally profitable, is it truly franchiseable? Or is it simply scalable for a small percentage of operators and a narrow set of markets?

If a franchisor’s growth story depends on adding units faster than the system can support them, does that create strength or does it hide weakness until it is too late?

If a franchisee’s path to “success” increasingly depends on becoming a multi-unit operator to gain purchasing leverage and overhead absorption, what does that mean for the single-unit owner, the one franchising has historically positioned as the heartbeat of the model?

Another subtle but telling signal has surfaced in recent conversations. I have heard more about the possibility of five-year franchise agreement terms, a shift away from the ten-year agreements that have long been standard. On the surface, this may be framed as flexibility. But it is hard not to wonder what is really driving it. I almost feel like there is worry about franchisees making it ten years. If the industry is shortening terms because it is unsure about long-term viability at the unit level, what does that say? Is it a prudent modernization, or is it an admission, however quiet, that the road ahead feels less predictable?

And if franchise terms shrink, what happens to long-term thinking? Does it encourage reinvestment and brand stewardship, or does it subtly incentivize short-term optimization? Does a five-year term make it easier for franchisees to exit, or does it make it harder for them to build wealth because they are constantly in renewal mode? Does it change how lenders view the risk? Does it alter the relationship between franchisor and franchisee in ways we have not yet fully considered?

Now let’s zoom out further. The balance that once defined franchising feels increasingly misaligned in multiple directions:

The balance between franchisor revenue structures and franchisee margins… When royalties, marketing funds, technology fees, and required vendor costs rise while unit economics tighten, where does the pressure go? It goes to the franchisee.

The balance between “support” as a promise and “support” as an experience… What does support mean today when operations have become more complex, labor is more volatile, and technology is no longer optional? Are franchisors adequately resourced to deliver meaningful support at scale, or is support increasingly a marketing statement rather than a lived reality?

The balance between development momentum and operational readiness… Is the industry rewarding franchisors for selling franchises or for building profitable franchisees? When the scoreboard is unit count, does that create blind spots around unit performance?

The balance between brand standards and local market realities… As costs rise, franchisees look for flexibility. As brand competition intensifies, franchisors look for consistency. Where is the line between protecting a brand and suffocating a franchisee’s ability to adapt?

None of these questions are intended to indict franchising. They are intended to protect it. Because if franchising does not engage in honest self-examination, external forces will. Regulators. Media. Plaintiffs’ attorneys. Consumer advocates. That is not fearmongering. It is how industries get reshaped when they fail to address internal fractures before those fractures become public.

So let’s ask the questions that might actually matter most right now.

What is the franchisor’s responsibility in ensuring unit economics remain viable, not just at the start, but over time as costs and markets change?

How often should franchisors revisit and recalibrate their economic model, especially in segments where margins are structurally thin?

Should franchise systems be required, ethically, if not legally, to present prospective franchisees with a more stress-tested picture of potential outcomes, including scenarios where costs rise faster than revenue?

What is a fair measure of success for a franchisee today? Is it net income? Cash flow? Return on invested capital? Owner wage plus profit? And how many franchisees in a given system are truly hitting that measure?

How do we define “responsible franchising” in 2026? Is it slower growth? More selective franchisee recruitment? Different fee structures? Greater franchisor skin in the game? More investment in support? Some combination of all of the above?

And perhaps the hardest question: if a system’s economics cannot support an average operator in an average market, does the industry have the courage to say that model needs to change, even if it disrupts the way franchising has traditionally generated growth?

I do not believe franchising is broken. I do believe it is at an inflection point. Franchising has survived many cycles, but survival has never been accidental. It has required adjustment, restraint, and sometimes reinvention. Tweaks address symptoms. Structural shifts address causes. Avoiding that work risks allowing the story of franchising to be written by bankruptcy filings, closures, and disillusionment rather than by opportunity and partnership.

This is intentionally an open conversation, not a verdict. I want to hear from franchisors wrestling with these realities internally, from franchisees who are thriving and from those who are struggling but still believe in the model, and from lenders, suppliers, advisors, and operators who see the pressure points from different angles.

If asking whether there are too many brands, too many look-alike concepts, or too many systems chasing the same segments sparks deeper thinking and conversation, then so be it. Not because I want fewer entrepreneurs. Not because I want less competition. But because I want franchising to remain one of the most credible and powerful vehicles for the American Dream, not a model that quietly drifts toward imbalance until a reputational crisis forces change.

From what I have seen during the past two years, the question is not whether the industry will change. It will. The real question is whether that change will be deliberate, transparent, and collaborative, or reactive and forced under scrutiny. The conversation is not a distraction from the work. It may be the work.

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About the Author

Paul Segreto brings over forty years of real-world experience in franchising, restaurants, and small business growth. Recognized as one of the Top 100 Global Franchise and Small Business Influencers, Paul is the driving voice behind Acceler8Success Café, a daily content platform that inspires and informs thousands of entrepreneurs nationwide. A passionate advocate for ethical leadership and sustainable growth, Paul has dedicated his career to helping founders, franchise executives, and entrepreneurial families achieve clarity, balance, and lasting success through purpose-driven action.

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About Acceler8Success America

Acceler8Success America is a comprehensive business advisory and coaching platform dedicated to helping entrepreneurs, small business owners, and franchise professionals achieve The American Dream Accelerated.

Through a combination of strategic consulting, results-focused coaching, and empowering content, Acceler8Success America provides the tools, insights, and guidance needed to start, grow, and scale successfully in today’s fast-paced world.

With deep expertise in entrepreneurship, franchising, restaurants, and small business development, Acceler8Success America bridges experience and innovation, supporting current and aspiring entrepreneurs as they build sustainable businesses and lasting legacies across America.

Learn more at Acceler8SuccessAmerica.com