INSIGHTS: Is 2026 the Year Franchising Goes Mainstream?

As labour costs surge and consumer confidence wavers, a growing number of operators are turning to the franchise model as a smarter path to growth. But is it the silver bullet the industry has been waiting for?

To say 2025 was challenging for the restaurant and hospitality industry would be an understatement. The sector relies on discretionary spending, and the protracted cost-of-living crisis has placed enormous pressure on an industry still finding its post-pandemic footing.

The numbers tell a sobering story. According to RSM UK's Consumer Outlook, some 35 percent of UK consumers intend to cut back on dining and drinking out in 2026, a pattern that has persisted for the third consecutive year. Meanwhile, the British Beer and Pub Association (BBPA) recorded 4,078 hospitality venue closures in 2024, and 3,353 businesses entered insolvency across the sector in 2025. Monthly insolvencies remained consistently above 220 throughout last year, with high-profile casualties including BrewDog (which shuttered ten venues), Leon Restaurants and Bistro Live.

Then came the Budget. According to UKHospitality, the October 2024 Autumn Budget delivered an estimated £3.4 billion in additional annual costs to the sector. Reductions to the employer National Insurance threshold, coupled with increased employer contributions, mean that a further 774,000 workers are now eligible for employer NICs, at a cost to hospitality of £1 billion alone.

Layered on top of a higher National Living Wage and new obligations arising from the Employment Rights Bill, operators are being forced to fundamentally re-examine their expansion strategies. Business rates relief for the sector was also slashed from 75 percent to 40 percent, landing operators with what amounts to a 140 percent increase in their average rates bill.

The human cost has been real. The sector lost an estimated 89,000 to 100,000 jobs in the immediate aftermath of the Budget, while the BBPA projects a further 378 pub closures in 2025 across England, Wales and Scotland, representing 5,600 direct job losses.

Yet despite these headwinds, the UK hospitality sector remains a cornerstone of the national economy. As the country's third-largest private sector employer, with approximately 3.5 million workers, it contributes £93 billion to UK GDP annually and generates £54 billion in tax receipts for the Treasury. If the industry takes its foot off the gas, it will be felt directly in the Government's growth agenda.

Rollouts Are Getting Harder

Traditional site-by-site expansion has never been more capital-intensive. Rent, rates, service charges, insurance, fit-out costs, and stamp duty land tax all accrue before a single employee is hired or first cover is served. In a climate of compressed margins and cautious lending, many operators are understandably hesitant to commit.

Which raises an obvious question: what if there were another way to keep rolling out?

Enter the Franchise

Franchising, the model in which a franchisee acquires the rights to operate an established brand and replicate a proven business, has long been a feature of the quick-service restaurant sector. But in 2026, it is attracting renewed attention from a much broader pool of operators, including full-service restaurants and grab-and-go concepts.

The British Franchise Association's most recent National Franchise Survey reveals that the UK is now home to more than 1,000 franchise systems, operating across more than 50,000 units and employing over 770,000 people. A BFA survey conducted at the start of 2026 found that 77 percent of members described themselves as 'very' or 'fairly' confident about their business plans for the year ahead, a striking degree of optimism in the current climate.

The gap between the UK and the United States, however, remains significant. According to the International Franchise Association's 2026 Franchising Economic Outlook, the US now counts approximately 845,000 franchise establishments, supporting nearly 8.9 million jobs and generating output worth some $921 billion. The QSR sector alone accounts for more than 204,000 of those units. The scale of the American franchise economy underscores just how much headroom the UK market has to grow.

The Franchisor's Opportunity

For a brand considering franchising, the most compelling argument is capital efficiency. Under a franchise arrangement, the franchisee assumes the financial risk associated with a new site, the lease, the fit-out, the staffing and working capital, while the franchisor receives ongoing royalties without shouldering the full weight of expansion costs.

This structure opens up possibilities that would previously have seemed marginal. Locations that might fail to meet an operator's own hurdle rates for return on capital can become viable if a franchisee, with local knowledge, lower overheads and a personal financial stake, is prepared to take them on. Operators can choose between a wholly franchised model, in which all new sites are taken to market through franchisees, or a blended approach that combines company-owned and franchised units.

Burger King UK demonstrated the commercial logic of this approach in December 2025 when it announced plans to open approximately 30 new restaurants annually from 2026 onwards, underpinned by a new 20-year master franchise agreement. It is unlikely to be the last major operator to make a similar move.

The Broader Market Shift

The structural shift towards franchise and partnership models is not confined to a handful of early movers. Analysis published by Mordor Intelligence in early 2026 identifies franchise-led expansion as one of the defining trends reshaping the UK hospitality market, noting that chains and franchised operators are demonstrating significantly stronger survival rates than independent operators, in part because of their economies of scale, brand visibility and access to capital.

Total sector revenue in the UK restaurant and pub industry is projected to approach £171 billion by the end of 2026, according to Audit Consulting Group, and the full-service restaurant market is forecast to reach USD $35.78 billion this year, growing at a CAGR of 6.85 percent through to 2031. Much of that growth is expected to flow through scalable, structured business formats, precisely where franchising excels.

The consumer picture, meanwhile, is gradually improving. Mintel's UK Eating Out Review 2026 notes that nine in ten Britons still dine in restaurants, and 84 percent order takeaway, demonstrating a resilient underlying appetite for out-of-home food. Operators who can offer compelling value, through set menus, loyalty apps and meal deals, are best positioned to capture that spend as confidence slowly rebuilds.

Not a Silver Bullet. But a Serious Option

Franchising is not without its complexities. Both franchisors and franchisees need to enter arrangements with a clear understanding of the obligations involved: brand standards, territory rights, royalty structures, operational controls and, critically, legal protections on both sides. Poor franchise agreements, or the wrong franchisee in the wrong location, can damage a brand as quickly as a failed company-owned site.

The BFA's confidence data for 2026 is encouraging, but the sector's leaders are appropriately realistic. Graham Duckworth of Driver Hire summed up the mood well when he noted that the degree of success in 2026 will be shaped by external factors, particularly ongoing economic uncertainty and the implications of the Employment Rights Bill.

That note of caution is well-placed. The headwinds facing hospitality, labour costs, regulatory change and cautious consumers, have not disappeared. But franchising provides operators and entrepreneurs with a credible alternative to traditional rollout strategies; a means of continuing to grow without concentrating all of the financial risk in a single set of company accounts.

Is 2026 the year franchising goes mainstream in UK hospitality? The evidence suggests it is. The model's time has come, not because the industry has run out of options, but because franchising has quietly become the most rational one available.

Charlie Greene writes for Discovering Hospitality on hospitality strategy and franchise law.