Mark Vandegrift 
Welcome to the latest episode of FranSimple, the podcast designed to make the concepts of franchising simple. I'm your host, Mark Vandegrift, and with me is the president of FranSource, an all-time expert on franchising and my franchise bro, Steve Vandegrift. Steve, how you doing today?

Steve Vandegrift
Doing great, Mark. Always great to share information.

Mark Vandegrift 
Good. Good. Well, you recently shared some information. You wrote a blog regarding the release of the International Franchise Association's 2026 Franchising Economic Outlook Report and the fact that a lot of economists have highlighted franchising as one of the fastest growing sectors heading into the spring and summer months. But over the past few years, we've constantly heard about economic uncertainty from inflation spikes to supply chain issues. Would you share what's changed over the past few years?

Steve Vandegrift
Sure. Certainly in 2022, we were dealing with peak inflation near 9%. We had major supply chain breakdowns and of course, labor shortages. So now we fast forward to 2026 and many of these pressures have certainly eased. Supply chains have stabilized, inflation has moderated somewhat and the labor market has become more predictable. So that stability has created a much healthier environment for both consumers and business owners alike.

Mark Vandegrift 
Interesting. Well, what do you think are the biggest drivers behind this recovery, if you want to call it that, that people might not be paying attention to?

Steve Vandegrift
Well, ultimately a few key things stand out. First, supply chains have finally normalized, which helps stabilize sourcing of supplies and certainly pricing. Second, policy changes, especially recent tax legislation. That's improved cash flow for many businesses. And third, we're seeing stronger consumer confidence, which is critical because it obviously fuels spending and entrepreneurship.

Mark Vandegrift 
So based on that, why is franchising standing out compared to say independent businesses?

Steve Vandegrift
Well, we've seen over the decades that franchising, really thrives in what I would call uncertain and recovering markets because it reduces risk ultimately to that entrepreneur. Franchisees, they benefit from, I guess I would say that proven systems, established branding, and of course ongoing support. And during volatile times, these advantages become even more critical and more valuable because you're not building everything from scratch as an independent business owner has to do.

Mark Vandegrift 
Okay, well, what, give us some specific strategies that you can share that help franchise businesses stay resilient during these tougher years that we've had in the past.

Steve Vandegrift
Well, many franchises, they're focused on operational efficiencies, so tightening costs, sharing resources across multiple locations and being intentional about expansion. So instead of, let's say, rapid growth, they prioritize smart growth by really identifying areas in the US that they believe were more resilient to the disruptions. And that discipline has really paid off.

Mark Vandegrift 
Good. Well, we know that operational efficiencies are really important, but I'm going to jump over to the brand side. So how important is brand recognition and access to resources in relation to the franchising model?

Steve Vandegrift
Well, in two words, it's huge. Established brands, they already have customer trust, client trust. It shortens the ramp up period. And on top of that, franchises often have better relationships with lenders and stronger purchasing power, which helps control their costs and certainly improve their margins.

Mark Vandegrift 
Well, I would think the trust in a down economy makes a big difference from the standpoint of a brand system itself. So marketing system. What seems to be a key ingredient there in terms of the economic downturn?

Steve Vandegrift
Yes. Well, the projections are definitely encouraging. In the U.S., we're expecting about 1.5 % growth in franchise units, which equates to roughly 845,000 new locations. And in addition to that, employment is projected to grow by approximately 1.8%, which will add around 156,000 jobs. And total output could exceed $920 billion. And that contributes about 3 % to the US GDP.

Mark Vandegrift 
Okay. So you threw out a lot of numbers there. Going back to the brand question a little bit, because we always want to talk marketing systems. It seems like when we look at trust, okay, as a key factor of buying behavior and these, I guess, hotter brands that come out, right? They spike here and there. You look at, I was just talking to someone the other day about the tumblers, know, these puppies right here and how Yeti and Stanley and Owala and Hydroflask, they come and go. It seems like the trust that you get when a brand is seen and heard and it's delivered consistently is really a key factor during these downturns because people are looking for things they can trust in, right? Would you agree that that's a factor?

Steve Vandegrift
Oh it's huge. Yeah. Brand recognition is huge, especially in uncertain times because consumers gravitate towards those establishments that they trust. They built a level of respect for. They know they're going to get a good experience. And so it certainly has a major role in helping businesses survive during those economic turmoils that we've been through.

Mark Vandegrift 
Yeah. And it seems like the marketing systems too, if it's truly a system, it's been proven on how to create a customer. Certainly when you get a downturn, you run into people with less discretionary income, but at the same time, the consumption of the message is consistent and constant. And that would help a little bit buffer some of the downturn numbers that you had mentioned.

Steve Vandegrift
Almost definitely. You take an independent business and now there's a downturn in the economy. The last thing they think to do is, I really need to ramp up my marketing. And so they put themselves behind the proverbial hate ball, so to speak. So no, the marketing systems themselves are critical because you don't want to wait until you're in a tough time to suddenly realize that, shoot, we should have really developed our marketing systems.

Mark Vandegrift 
Yeah, so you threw out a lot of numbers before. Tell us what these numbers tell us about the broader economy.

Steve Vandegrift
Well, ultimately, certainly within the franchise industry, it's growing and that is hopeful for the rest of the economy because they, the independent businesses tend to follow in line. So as things ramp up due to these systems that are in place with franchise brands and nationally known brands, they somewhat benefit from that. And so we do feel that it's a good indicator that the economy in general is improving and the opportunities themselves are improved.

Mark Vandegrift 
Are there any particular categories of franchises that are leading this growth?

Steve Vandegrift
Yeah, several actually stand out. Child education type franchises, care services are booming and certainly along with the residential and commercial service brands. That sector itself or these sectors are growing over 3 % because they meet the essential recurring needs that consumers have. So, it's a growing, those industries are certainly growing.

Mark Vandegrift 
That's interesting. You mentioned child education, given what we know is going on with the Department of Education, some of the, I guess, revelations that came out during COVID and what was being taught in schools, et cetera, et cetera. Do you think that those particular franchise concepts are meeting that need? People are looking for alternative resources?

Steve Vandegrift
They are, and that's what we're honestly seeing. You can't argue with the data, and the data is certainly proving that out in a big way.

Mark Vandegrift 
Okay. And then on the care side, you mentioned the care category. Is that child care or adult care?

Steve Vandegrift
It's really child focused, is the specific category that's growing, but again care services in general is growing. So that's both children and adults and seniors.

Mark Vandegrift 
Okay. And what about retail and wellness? Are they still strong, strong plays?

Steve Vandegrift
definitely. Retail is seeing steady growth and it's really driven by value based purchasing. While wellness franchises are benefiting from certainly our aging population and increased health awareness. You know, we're reading articles more and more every day about the importance of health, whether it's food, whether it's exercise, etc. So in reality, these are long term trends. They're not simply that's called short term spikes.

Mark Vandegrift
Okay, so let's get to the franchisees that are listening right now. For someone considering franchise ownership, what do you think is the biggest opportunity?

Steve Vandegrift
Well, I would have to say that the biggest opportunity is choosing a franchise business that is already optimized, what we would say for efficiency, for scalability, and that has really proved their staying power during these tougher economic times. Certainly why the economy is stabilizing, franchisees can focus more on growth instead of simply survival. And it's a much better mental feeling for sure.

Mark Vandegrift 
So we've seen a lot of new concepts coming out. Do you tend to recommend going after new concepts or the ones that have maybe stayed the test of time through a difficult period like we saw with COVID?

Steve Vandegrift
Well, it's risk tolerance is what I would say. You know, there's individuals that are willing to take a little bit bigger risk. They might see a new concept that they feel might be trending or will trend. But certainly for many, many people, they want that safety and security. And so you stick with an established brand. Certainly something that we always like to stress is make sure you're passionate about the business. I don't care if it's a food and beverage establishment. You love the the meals that they prepare, et cetera, whether it's a service business, you're really into, let's say, exercise, you might want to look at something in fitness. And again, going with the established brand is certainly going to give that individual a higher level of confidence, especially if the risk tolerance is lower.

Mark Vandegrift 
Yeah, that makes sense. And if they're entrepreneurial, I would assume they tend to go after the one that's not available in their area. And it's a newer concept. So they can say they were the first one to bring it to that area. Yeah.

Steve Vandegrift
Oh that is so true. Yes. And there's a lot of pride in that. Of course, there's always those individuals. They want to have a couple existing locations around them. They feel like getting the awareness out there will be easier. But if the franchisor has systems in place, they know how to draw customers or clients to a brand new location in an area that previously did not have that particular concept. No question.

Mark Vandegrift 
Okay, well, what's one piece of advice you'd give these prospective franchise owners?

Steve Vandegrift
Well, first of all, we always say do your due diligence and we could do an entire podcast on what that involves. Ultimately, not all franchises are created equal. You need to look at the support system, the training system. How much training are they going to provide? If it's applicable, are they going to provide on-site training and support? What resources can they provide? What's the unit economics is another critical thing certainly, if they have an item 19 financial performance representation in their FDD, that should be evaluated. Are they providing data on the industry? Is it growing? Is it shrinking? And then certainly the market demand, you know, is it something that you will in fact generate customers or clients? The right fit can position a franchise owner for long term, sustainable success in a business that they will really enjoy operating. So that would be, I guess, a quick suggestion.

Mark Vandegrift 
That's a lot of pieces of advice. Let's break those down. Let's take the concept itself. So we were just talking a little bit about fit and what makes sense to, I guess, go after from a passion standpoint. Give a little perspective on what you've seen in the past in terms of when it works out, when it doesn't work out around fit.

Steve 
Sure! Well, ultimately, let's face it, if you really love your business and what you're doing, you know, we all know as business owners that it's not always easy. It can be a tough road. And if you're passionate about that brand, if you're committed to what you're doing and to the brand, it makes it easier to really work yourself through those tougher times, whether it's economic or otherwise. And so that to me is one of the reasons that just has to be a good fit. Your passion needs to be there. Without that passion, you're going to want to lay down in the fetal position and not get up till it's all over. And we all know you're probably going to be out of business before that occurs.

Mark Vandegrift 
A couple of the other ones you mentioned, the operations, the training, how does a franchise, a prospective franchise owner actually vet those things? Is that done during discovery day, would you say?

Steve Vandegrift
Well, it's a combination. Number one, the franchise disclosure document, item 11 talks about the franchisors' training assistance, what they're going to provide. There's even an itinerary for the training itself, that initial training. What do they say in item 11 about ongoing training and support? So certainly the FDD is a valuable resource in terms of determining it. Discovery Day you brought up. I love Discovery Days. We've done many, many Discovery Days with our clients, especially when they're first launching. And Discovery Day is really a chance to, I like to say, yes, you want to love the layout, the design, the menu items, et cetera, but it really allows both parties, the prospective franchise partner and the franchisor to see if there's a good fit personality wise. We always like to advise our clients as they're beginning to offer franchises. That is a key component. Do they fit the brand? Do they have someone of the same value system, et cetera? Because that makes, we like to say, for a great franchise network. So Discovery Day is certainly very valuable. And a final one I'll discuss today is simply what we call franchisee validations. If they do have operational franchisees that are disclosed in the FDD, franchisors' best practice is to give the prospective franchise partner the opportunity to speak with them, get feedback. And what's nice is the franchise partners, they don't have to worry about being compliant with the FTC franchise rule. And what I mean by that is the franchisor is typically going to provide some level of financial performance in item 19 of the FDD. But franchisees literally, if they elected to share, they could share their profitability the last year, the last two years. They can talk about how the training and support was. What's the franchise support team like? Are they responsive? Do they go above and beyond? So there's really a few different phases during the franchise sales process that prospective franchisees can really gauge that franchisors support, resources, training, all of that should be fully evaluated. And then the final combination, like I say, is talking to the franchisees. What did you think of the initial training program? What was the onsite support? You know, did they really provide what they say they're going to provide in the FDD?

Mark Vandegrift 
You've inherited, let's call it that, franchise concepts where they went through another franchise development consultant and you found that their operations manual, let's say, it was for a concept that wasn't even in the food industry and yet throughout the operations manual, it references restaurants and things because these other franchise development consultants just use templated approaches and questionnaires. How would a prospective franchisee, vet that sort of thing without being able to see the operations manual. If, let's say they were brand new, so they couldn't go and talk to three other existing franchisees.

Steve Vandegrift
Well, ultimately, it's difficult for a franchise partner to identify those things. What have happened, and you've brought this up, we've had every year many clients that come to us, they've granted a couple franchises, they've been through the training program, and typically the first thing they identify is their franchise operations and policy manual is lacking. In other words, there's no day-to-day procedures. We're working with one of those clients now. They had an 88-page manual and they realized that they had no real content. was a bunch of fluff. Traditionally, that operations manual was not where we're going to see that conflict. Even a bad consultant is going to recognize, I need to take the restaurant word out. Where we do see it though, these clients come to us, we start developing their franchise operations manual. But prior to that, we asked them to provide us a copy of their FDD. And they're always happy to do so, but they ask, well, what do you need to look at the FDD for? And we basically explained that franchise attorneys cross-referenced the operations manual many times. And so we'll look through their manual, we'll look at the references to the operations manual in the FDD and the franchise agreement. And if there's 62 references in the FDD and the agreement, maybe they covered one in the operations manual. It's the, where you see that templated approach is, as an example, we have a swim school franchise client who actually leases pools. They have a national relationship with one of the huge fitness gyms. And so they're able to use those. Well, when they sent us their FDD in part because we were going to redo their operations manual, there were constant references to brick and mortar. Well, that tells us they used a restaurant or a retail store FDD and it was causing confusion. Yes, this client had granted a couple of franchises, but they knew there were some deficiencies. Ultimately, they made a choice to switch to one of our preferred franchise attorneys because they really needed it to be specific for their business so that either the franchisee, the prospective franchisee, or more importantly, their attorney doesn't say, Steve, this really doesn't reflect the business that they're telling you you're going to operate. And then, of course, that leads to us discussing the franchise sales system with them. And a lot of these companies will promise the world in that regard and then not even provide them with a franchise application. And so typically when we get these what we call one-off projects, it becomes three or four projects because we need everything to sing off the same song sheet. That's a great question.

Mark Vandegrift 
Good. Well, we started out talking about the numbers for 2026. So let's kind of bring it back to that as we wrap up today. So what was one number, if there was one number that jumped out to you above any of the others, what would you say it is that gives you hope for the recovering economy and or the, I guess the momentum that franchising has in 2026?

Steve Vandegrift
Well, it's really those combination of factors, right? We're talking about growth in franchise units. We're talking about growth in new locations overall. The number of jobs that are going to be added. All of this is a sign that franchising is alive and well. And we've said we've survived recessions 2008, 2009, we survived pandemics. We still had businesses that felt very confident because again, that entrepreneurial spirit says this too shall pass. And so they were still growing. They were still even new concepts were coming to us saying, we think this is the perfect time. We want to come out of X. We want to come out of the pandemic with this structure, with the ability to really start growing our business. We want to come out of that economic downturn or that recession. And so again, I have to say that it's the overall what we're seeing data wise that gives us great hope that franchising is going to continue to grow in 2026 and beyond.

Mark Vandegrift 
Good, we'll sum this all up in one sentence. Why choose franchising in 2026?

Steve Vandegrift
Well, simply put, I'd say franchising really, it provides a rare combination of stability, scalability, support, training, which really makes it one of the smartest and fastest way to begin and to grow a business in today's economy and even during uncertain times.

Mark Vandegrift   
Awesome. Well, thanks for joining today's episode of the FranSimple Podcast. We really appreciate all of our listeners out there. If you haven't liked, share or subscribe to the FranSimple Podcast, please do. And until next episode, may your business expand through the power of franchising. Have a great day.