New Franchise Operator Report highlights financial literacy gaps and talent pipeline risks

July 14, 2026

Alert

This month, the American Franchise Academy, LLC® released its 2026 State of the Franchise Operator Report, a data publication intended for franchisees, franchisors, franchise leaders, vendors, and franchise industry partners. The report is intended to provide a ground-level view of the franchise operator experience based on responses received from approximately 878 franchise professionals across four roles: franchisees, district managers, unit managers, and frontline team members.

The report concludes that franchise systems may be growing, but many operators lack the management systems, financial literacy, leadership infrastructure, and employee-communication practices needed to sustain growth. For franchisors, the report underscores the need to treat franchisee support as more than brand training, product standards, and marketing guidance. For franchisees, the report highlights the importance of building scalable business systems that reduce owner dependency, improve financial visibility, and create a reliable leadership pipeline.

Background

The report was issued by the American Franchise Academy, which describes itself as an independent business management academy for franchisees and their teams, founded in July 2016 by Aicha Bascaro. The Academy’s stated focus is on training franchisees, district managers, and unit managers, based on the distinction that franchisors provide brand systems while franchisees must build the business systems needed for team performance, income, profit, and scalability.

The report draws from the following primary data sources: 54 franchisees, 421 district managers, 248 unit managers, and anonymous employee engagement surveys conducted between October 2024 and October 2025, covering 155 frontline employee respondents across multiple franchise brands and locations. The report data is aggregated and does not identify individual brands, companies, or respondents.

Key report findings

The report identifies two primary themes across the franchise industry:

An experience deficit among operating leaders. Many leaders are being placed into roles before they are fully prepared, including district managers and unit managers with limited time in their current roles.
The absence of clear systems for accountability, financial management, team development, and communication.

For franchisees, the report identifies financial visibility and profitability management as the top challenge. The report also identifies leadership development, operational consistency, people and staffing, and marketing or customer acquisition as the other leading challenges facing franchisees. The report states that approximately 43% of franchisees cited financial performance and profitability as their number one concern, and it describes owner dependency as a recurring issue where the business cannot run without the owner present.

For district managers, the report shows a leadership layer that is strategically important but often underdeveloped. The report states that 35% of district managers have been in the role for less than one year and that 57% have less than two years of experience. District managers reported an average confidence score of 3.19 out of 5 when leading a district. Their top challenges include time management and prioritization across units, accountability when they are not present, operational consistency across multiple locations, staff development, and communication or follow-up across sites. The report characterizes these issues as leadership-system problems rather than individual capability failures, emphasizing that district managers often know their brands but lack the structure and confidence to lead through others at scale.

For unit managers, the report highlights similar gaps at the store level. More than one in three unit managers have been in their current leadership role for less than one year, and the median time in role was approximately one year. Unit managers reported an average confidence score of 3.31 out of 5, slightly higher than district managers. Their top challenges include staff management, time management and delegation, accountability, financial literacy, and training and developing team members. The report also identifies a technology and financial literacy gap.

For frontline employees, the report shows strong engagement but meaningful gaps in pay clarity and owner connection. 95% of frontline employees reported that they do their best at work every day, and 91% reported that their unit leaders or managers care about them. At the same time, only 59% reported being clear about how and when they can get a raise, and only 68% reported feeling that they are paid fairly. The report also identifies a 14% “leadership proximity gap,” with 91% of employees reporting that their unit leader or manager cares about them, compared with 77% reporting that the business owner cares about them.

Implications for franchisors

For franchisors, the report suggests that brand support should extend beyond brand standards, products, services, image, and marketing. The report repeatedly distinguishes between brand systems supplied by franchisors and business systems that franchisees must build to manage teams, income, profit, and scale. That distinction has practical implications for franchise support programs, field operations, training materials, and franchisee relationship management.

First, franchisors may need to reassess whether their support model assumes a level of business-management sophistication that franchisees and managers do not actually have. The report states that franchisees want to understand their numbers rather than simply receive or deliver reports. It also states that it is difficult for unit managers who cannot read a profit and loss to be responsible for understanding financial results. In practice, franchisors that want consistent execution across a system may benefit from clearer financial dashboards, practical cost-management training, and tools that translate operating data into action at the unit and district levels.

Second, franchisors should consider district manager and unit manager development as a systemwide risk-control issue, not just a franchisee-level human-resources issue. The report describes the district manager as the most leveraged leadership investment because each district manager’s effectiveness is multiplied across every unit they oversee. It also states that the unit manager is the franchisor’s brand on the floor and that the unit manager’s ability to lead the team, manage costs, and create a consistent guest experience determines whether the broader organization works. These findings support a more integrated approach to training, where brand compliance, operational consistency, leadership routines, and financial literacy are connected rather than treated as separate initiatives.

Third, franchisors should pay close attention to frontline pay clarity and career-path communication. The report indicates that 78% of frontline employees want to grow in pay and responsibility, while only 59% know how and when they can get a raise. That gap suggests that employee retention challenges may arise not only from compensation levels, but also from unclear advancement criteria, inconsistent communication, and perceived scheduling or promotion favoritism. Franchisors that provide model tools for raise criteria, scheduling transparency, and career-path communication may help franchisees improve workforce stability while reinforcing brand experience.

Implications for franchisees

For franchisees, the report’s message is that growth depends on building a business that can operate without constant owner intervention. The report identifies owner dependency, inconsistent operations, and lack of financial visibility as recurring barriers to scalable multi-unit ownership. Franchisees should therefore view systems, manager development, and financial literacy as core enterprise-building functions rather than optional back-office improvements.

Franchisees should also focus on the leadership pipeline. The report states that 30% of unit managers aspire to become district managers and that 25% of district managers aspire to become franchisees or business owners. That ambition is an asset if franchisees develop it deliberately, but it can become a risk if managers are promoted into larger roles without clear expectations, training, and operating routines. A practical response is to formalize manager onboarding, unit-visit routines, accountability systems, and financial training before expansion creates complexity that the organization cannot absorb.

Finally, franchisees should treat frontline communication as a retention lever. The report suggests that the frontline engagement problem is not lack of effort, because 95% of respondents reported giving their best at work every day. The more immediate issues are clarity about raises, perceived fairness of pay, schedule flexibility, and the visibility of the business owner. Franchisees can address those issues by making raise criteria more transparent, improving scheduling practices, and creating consistent owner touchpoints with employees.

Conclusions

The report presents franchising as a sector with substantial workforce ambition but uneven operational infrastructure. Stronger operator support may require franchisor investment in leadership development, financial literacy, and tools that help franchisees implement systems consistently across units. Multi-unit profitability and scale depend on moving from owner-driven execution to manager-led, financially literate, system-supported operations. The report’s broader implication is that the next stage of franchise growth may depend less on whether franchise systems can sell more units, and more on whether operators at every level can build the management capacity to run them well.

If you have questions, reach out to attorney Scott Opincar.

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