The State of the Market with Bank of America's Franchise Group

Bank of America’s Franchise Group  helps entrepreneurs access the capital, financial guidance, and strategic support they need to start, acquire, grow, and expand franchise businesses. The team  works with everyone from first-time franchise owners opening their first location to sophisticated multi-brand, multi-unit operators managing large portfolios.  They focus on understanding each client’s goals, helping them evaluate opportunities, and providing the financial solutions and strategic guidance that can support long-term success.

That’s why we were excited to sit down with BofA’s Kristy Hall, Senior Vice President and National Executive of Franchise Programs, and Jason Baroni, Senior Vice President and Franchise Program Development Manager, to learn more about their read on the state of franchising, what they look for when they make decisions about financing, and what sets off alarm bells for them about franchise systems or potential operators.

Kristy has focused on small business banking with Bank of America for more than 31 years, and Jason has been helping businesses achieve financing for 28 years, with the last 12 focused on franchising.

Franchise industry outlook

KRISTY HALL: I think it’s an exciting time for franchising because the industry continues to demonstrate both resilience and steady growth. The International Franchise Association projects more than 12,000 new franchise businesses will open in 2026, bringing the total number of franchise establishments in the US to roughly 845,000. That continued expansion reflects the confidence entrepreneurs have in the franchise model and reinforces why we’re seeing so much interest from prospective and existing business owners.

One trend that’s especially encouraging is the number of people entering franchising. Many first-time business owners are choosing this route because of the training, the operational support, and proven business model that franchising provides. We’re also seeing growing interest from existing operators and investors who recognize the opportunities being created as long-time franchise owners begin thinking about succession and transition planning.

With that said, it’s also a more disciplined environment than it was a few years ago. For example, interest rates remain elevated compared to the historic norms. Labor continues to be a challenge in certain industries, and both lenders and operators are placing a greater emphasis on unit economics, profitability, and sustainable growth rather than expansion for expansion’s sake.

Overall, I think the industry is becoming healthier because there’s a stronger focus on fundamentals. The brands and operators that are growing today tend to be doing so for the right reasons, and that’s with sound economics, strong execution, and a long-term perspective. That’s a positive sign for the future of franchising.

Growth sectors and trends

JASON BARONI: We’re seeing continued interest across several sectors, actually, especially businesses that provide recurring consumer demand or essential services. Home services, retail, auto, quick service restaurants, and pet and business services continue to generate significant interest because they often demonstrate resilient consumer demand and strong long-term growth potential.

We’re also seeing great demand in the early childhood education space, where we’re finding parents are seeking quality education during the preschool years to prepare their kids for kindergarten and beyond.

At the same time, lenders are becoming more selective and increasingly focused on the fundamentals. We’re more cautious when a franchise system has inconsistent unit performance, rapid expansion without the operational infrastructure to support it, or limited financial transparency. We also pay close attention to how existing franchisees are performing because they often provide the clearest picture of how a new location may perform.

Today, lenders are placing greater emphasis on franchisee performance, unit level economics, and whether a system can support sustainable growth over the long term. Ultimately, it’s less about chasing a particular category and more about identifying systems with strong unit economics, healthy franchisee performance, and the ability to support that sustainable growth.

KRISTY HALL: One of the biggest advantages of franchising is that there’s often a wealth of historical operating data available, and lenders like us spend a great deal of time evaluating it. We’re looking at the franchisor’s track record, brand stability, consistency across locations, and the overall health of the system. We want to understand whether franchisees are succeeding over time, whether the brand has demonstrated resilience through different economic environments, and whether there’s evidence of long-term demand.

We also look closely at the support the franchisor provides, such as do they have strong training, what are the operational resources, their technology, their marketing support, as well as just a healthy franchisee-franchisor relationship. All that contributes to stronger businesses.

Conversely, we’re more cautious when franchisee performance is inconsistent, support systems are underdeveloped, or growth appears to be outpacing the infrastructure needed to support franchisees effectively.

Ultimately, the strongest franchise systems are those that combine a proven business model with the resources and support needed to help franchisees succeed over the long term.

Successful franchisees and systems

KRISTY HALL: First of all, successful franchisees don’t always come from the industry. What matters most is that they have strong leadership skills, they understand financial management, they’re coachable, and they’re committed to executing to a proven model. Franchising is designed to provide training and support, so we’ve seen many successful franchisees come from different professional backgrounds.

We’re also looking at financial readiness. Does the borrower have appropriate capitalization? Do they understand the investment they’re making? Have they built a thoughtful business plan? And most importantly, we want to see they’ve done their homework. Have they reviewed the franchise disclosure document, and have they spoken with existing franchisees, and do they understand the local market they’re entering?

The strongest candidates tend to approach franchise ownership with a long-term mindset. They understand both the opportunities and the responsibilities that come with operating a business, and they’re willing to learn, prepare, and follow a proven model rather than assuming success will come automatically.

JASON BARONI: Private equity investment and increased M&A activity have helped many franchise brands accelerate growth, invest in technology that was needed, and professionalize their operations. At the same time, we’re also seeing experienced franchisees expand through acquisition, building larger multi-unit and even multi-brand portfolios, and growing into something we refer to as “MUMBOs”: multi-unit, multi-brand owners.

As a result, franchise ownership has become increasingly sophisticated. What has often been a single unit or small business investment can now scale into a larger enterprise of multiple locations, brands, and layers of management. That evolution has created new growth opportunities for operators and expanded the range of potential exit and succession planning options available to franchise owners.

For lenders, that means evaluating businesses at a broader portfolio level rather than focusing on individual locations alone. We’re looking at management infrastructure, financial performance across the portfolio, and the operator’s ability to successfully integrate and manage that continued growth.

KRISTY HALL: I think we’ll continue to see technology play a larger role, not just in customer experience, but also in the operations, data analytics, and helping franchisees run more efficient businesses. The brands that embrace technology thoughtfully will be better positioned to improve productivity, make more informed decisions, and adapt to changing consumer expectations.

I’m excited by the continued growth of entrepreneurship. Franchising creates opportunities for people who may not have otherwise considered business ownership by providing a proven model and ongoing support. And we’re also seeing growing interest from that next generation of franchise owners, as well as opportunities created through ownership transitions and succession planning.

The one challenge the industry will need to navigate is maintaining that momentum while staying disciplined. Many franchise systems are eager to grow, but long-term success depends on the strong unit economics, effective franchisee support, and a commitment to sustainable growth rather than growth for growth’s sake. The most successful owners take the time to evaluate the franchise system, understand the financing landscape, and they speak with the existing franchisees, and they think carefully about their long-term goals before making an investment.

Franchising has a strong future because of the best systems continue to evolve, innovate, and support their owners. That gives me confidence in where the industry is heading, and also I’m very excited to see where it’s heading.

JASON BARONI: It’s an exciting time to be in franchising. We continue to see growth, not only new brands coming into the space, but successful franchisees continuing to grow as well. And it’s fun to see the opportunities that the next generations have in front of them.