Franchising Becomes the Default Entrepreneurial On-Ramp

3. The next franchisee will probably be younger than you think

A bubble tea chain says nearly 35% of its franchisees are under 40. A frozen yogurt brand says 40%. A regional sandwich chain watched young owners go from under 5% of its system to 15–20% in a few years. A Southern fast-casual brand with 325 stores has a 300-unit pipeline being driven by millennial and Gen Z buyers.¹⁰


They say they want flexibility, community, and a brand whose values match theirs. That's true. But they're also being pushed: layoffs, fewer entry-level jobs, and AI taking the first job out of college are making ownership look like a career instead of something you do at 55.¹

4. Big franchise groups will become more dominant

It is almost physics that as a franchise brand grows, a group of 2-3 outsized franchise operating groups will appear. Come across a 500-location brand? Dig into their franchisee list, and you’ll probably find that one group owns 50-100 locations.

About one in five franchisees now owns multiple units — and together they control almost 60% of all franchised locations.¹¹ That concentration is speeding up in the brands everyone wants. This is normal market behavior, and it’s not a stretch to assume that these groups will become more dominant. For a franchisor, the big group brings less operational risk.

One viral bagel brand started franchising in late 2024. Within eight months it had signed 300 locations — to just 15 operators. One group took 30 stores in Florida. Two took 35 in Southern California. Its valuation went from about $60 million last fall to $300 million this spring.¹² A major sandwich chain went public this summer at roughly $7 billion. Its pipeline of 1,600 new stores is 90% spoken for by franchisees it already has — and the ownership bonus tied to the IPO went to 293 corporate employees, not a single franchisee or store worker.¹³ Among the 200 largest restaurant franchisees, the top ten grew four times faster than everyone else last year.¹⁴

Selling territory to a dozen professional groups is a smart way for a young brand to grow fast. It's also the end of the on-ramp for that brand. If you're an individual, you will never get a territory there. Your way in will be buying one of those units from one of those groups, ten years from now at a higher valuation.

5. State laws will shift in favor of franchisees, but SBA evolutions could blunt those gains

State by state, franchisees are getting more protection. Maryland's new franchise law takes effect October 1 and protects your right to join a franchisee association. Virginia banned non-compete clauses after your agreement ends. California now makes franchise brokers register with the state. Arizona is weighing a rule that says a franchisor needs a real reason to terminate you.¹⁵

The federal picture cuts both ways. The SBA brought back its Franchise Directory, the list of brands whose franchisees can get SBA loans. Some brands didn't re-register — in a few cases because it would have meant rewriting their disclosure documents. Their franchisees now can't get the cheapest capital in the system, and most of them don't know it yet.¹⁶ Before you sign with a brand, check that it's on the list. If it isn’t, a historically powerful funding pathway is harder to access.

6. AI will close the experience gap

The old argument against first-time owners was simple: they don't know what they’re doing, and thus will probably fail. That argument gets weaker every year that AI agents (Wave 2) exist. Operators can now launch on day 1 with an extremely knowledgeable and always-on operating assistant. However, the ability to translate these insights into a delightful, consistent customer experience still depends heavily upon people. 

We believe the combination of humans and agents is a tailwind for brick & mortar operators. In an industry where success is truly on the margins, agents might be a savior. 

Once one agent learns to check invoices, catch a landlord overbilling on common-area charges, or build a schedule that flexes with traffic, every operator on that brand's platform can have it the next day. The operating know-how that used to take a big company decades to build becomes available to a three-store owner. We call it "compound expertise, acquired instantly."

One more thing our data says. When you look at a brand, the disclosure document shows you the average store's sales. In our portfolio, the average is almost useless. Inside one 19-location brand, the best store runs a 36% profit margin and the worst loses money — same menu, same systems, same brand.¹⁸ The difference is the site, the manager, and the store’s age. Potential franchisees, ask to see the worst-performing stores, not just average or top-performing ones.

What 2036 looks like. Franchising stops being something people stumble into at 45 and becomes a path people start at 22. Work as a GM (Wave 3). Build a track record. Get matched to a brand and to capital on a platform. Buy your first store from a retiring owner on the strength of its tax returns. Fund the second and third on the cash flow of the first. Sign a development deal in your home market by 30 — knowing there's a real market to sell into when you're done.

For the brands: you have to choose. Some brands will sell territory to a dozen big groups and grow fast. Others will reserve territory for individuals, discount fees for employees who've put in the years, and grow the next generation of owners inside their own stores.¹⁹ Both can win.