Gen Z’s Franchise Rush Collides With a Private Equity Buying Wave

Franchise brands say applications from twenty-something buyers are climbing fast. At frozen yogurt chain 16 Handles, more than half of current and incoming franchisees are already millennials, and executives there describe a generation that treats ownership as a starting point rather than a retirement plan.

The same industry is living through its busiest run of private equity buying in years. A 23-year-old signing a franchise agreement this year is buying into a system where the ownership sitting above the counter is changing hands fast, and where the price of getting in is climbing at the same time.

The Youngest Buyers Franchising Has Ever Courted

Ashleigh Ewald is 23, a public policy graduate student who has also built her own ventures. She told Business Insider that “a lot of Gen Z is less focused on following one traditional path and more interested in creating opportunities for themselves,” adding that “the appeal is really about independence and ownership.”

Franchise systems are recalibrating around that shift. At PrimoHoagies, vice president of development Angela Coppler told trade outlet FastCasual that “over the past few years, we’ve seen younger franchisees going from less than 5% of the system to 15% to 20% of the system and still growing.” Chicken Salad Chick and bubble tea chain Gong Cha have reported similar upticks in interest from candidates in their twenties.

The ambition shows up in survey data too. One widely cited estimate puts Gen Z’s interest in starting a business at 62%, per franchise brand Fibrenew. But interest is not ownership. Guidant Financial, a small-business lender that surveys its own financing clients every year, found in its 2026 small business trends report that Gen Z still makes up only about 2% of actual business owners, trailing Gen X at roughly 44%, Baby Boomers at 32% and millennials at 22%.

Context matters here too. Youth unemployment ran at 10.4% in 2025, and the International Franchise Association’s 2026 Franchising Economic Outlook points to franchise establishments as an increasingly important source of entry-level labor demand for young workers shut out of a tight white-collar market. Franchise output is projected to grow from $907.3 billion to $921.4 billion this year, with total establishments climbing from 832,521 to 845,000 units and employment approaching 8.9 million jobs.

Private Equity Buys the Other Side of the Counter

While Gen Z buyers sign on at the unit level, institutional money is moving on the brands themselves. The research firm FRANdata estimates that more than 12.4% of active United States franchise brands now carry some level of private equity ownership or investment, and that PE-backed capital now touches roughly 31,000 individual franchise businesses nationwide.

Alicia Miller, managing director at FRANdata, has described 2026 as shaping up to be “an active and possibly crowded year” for franchise mergers and acquisitions. The math below shows why: five deals from the first half of the year alone moved billions in franchise brand value.

Those deals sit on top of an already-massive private equity footprint. Franchisewire’s tracking of second-quarter activity also shows Flynn Group, the largest franchise operator in the country, tripling its Planet Fitness holdings, and private equity firms buying up the brokers and lead-generation companies that feed new franchisees into the system in the first place. Roark Capital alone controls Subway, Dunkin’, Baskin-Robbins, Arby’s, Buffalo Wild Wings, Jimmy John’s, Sonic, Cinnabon, Auntie Anne’s, Carvel, Jamba, Moe’s Southwest Grill, McAlister’s Deli and Schlotzsky’s.

• 62% of Gen Z say they are interested in starting a business, per Fibrenew’s review of generational survey data.
• 2% of actual small-business owners are Gen Z today, according to Guidant Financial’s 2026 client survey.
• 12.4% of active US franchise brands already carry private equity ownership or investment, per FRANdata.
• 40% jump in industrywide franchise deal volume heading into 2026, a figure Goldman Sachs has cited.

Read together, the numbers describe two waves moving toward each other. One is a generation with outsized ambition and a still-small footprint. The other is a pool of institutional capital already large enough to own the brands that generation is lining up to join.

A Rising Price of Entry

Getting into that system costs more than it used to. Construction labor costs have risen 30% to 50% across most US markets, and according to franchise brokerage CT Acquisitions’ analysis of current investment ranges, most major food franchises have refreshed their initial-investment figures upward by 25% to 40% compared with 2019. That is one reason buying an existing unit, rather than building new, has become the dominant entry path for serious food franchise buyers this year.

Individual brands show the range. Wingstop’s 2025 disclosure document lists total initial investment of $298,200 to $1,013,500 with a $25,000 franchise fee, a 6.0% royalty and a 4% to 5% brand-fund contribution, against average unit revenue of roughly $2.1 million. Across the wider industry, royalty fees average about 7.1% of gross sales and range from 4% to 12%, based on VetMyFranchise’s 2026 review of nearly 1,800 franchise systems. A franchisee doing $1 million in annual sales at a 6% royalty sends $60,000 a year back to the franchisor before marketing fees or anything else.

None of that includes the buffer most first-time owners underestimate. Item 7 of a Franchise Disclosure Document rarely covers a founder’s personal living expenses during ramp-up, mandatory technology upgrades in year two, or cost overruns on build-out. Buyers who plan around the FDD number alone are usually the ones who show up undercapitalized in year one.

Scale Is Where the Margin Sits

The economics inside franchising reward size, not just entry. A single-unit operator running a $1.5 million location typically earns 13% to 15% EBITDA (earnings before interest, taxes, depreciation and amortization), according to CT Acquisitions’ operator data. Add a director of operations and shared back-office staff across five units and blended EBITDA rises to 17% to 20%. At ten units, with a regional manager and dedicated maintenance crew, margins reach 19% to 22%.

That gap is exactly why multi-unit and private equity buyers keep absorbing more of the map. As of 2025, 19.3% of all franchisees operate multiple units, and that group collectively owns 58.8% of every franchised location in the country, according to Franchise Times’ reporting on IFA data. Franchisors themselves run even richer margins, often 30% to 50% EBITDA, because they collect royalties without owning the real estate, staff or inventory risk sitting underneath every location.

A first-time Gen Z buyer usually enters at the bottom of that curve, a single unit, thinner margins, and a franchisor and its investors collecting a fixed cut regardless of how the location performs.

The Trade Group’s Own Second Thoughts

Even franchising’s leading trade association is airing some unease about where the money is headed. A commentary published on the International Franchise Association’s own site describes franchise agreements that carry hidden “Relationship Agreements,” terms requiring private equity buyers to accept restrictions never disclosed to the general public, and “sophisticated franchisee exemptions” that strip away consumer-style disclosures for buyers simply because they are well capitalized.

Franchising has always been about franchisors using other people’s money to expand their brands.

That line, from the same IFA commentary, captures a tension the industry rarely states so plainly in its own publications.

• Franchise research firms including FRANdata and VettedBiz argue private equity brings capital, technology and professional management that strengthen brands and support the franchisees operating under them.
• An IFA-published legal commentary warns that undisclosed side agreements and disclosure exemptions for well-capitalized buyers can quietly shift power away from franchisees.
• Franchise Times reporting notes that a misalignment between a private equity owner’s strategy and a franchisor’s expectations “can spiral and result in conflict” once the deal closes.

What Should a First-Time Franchisee Actually Check?

Before signing anything, a buyer should confirm who owns the brand, when that owner acquired it, what has changed in the system since, and whether royalty and marketing fees have moved. Ask current franchisees directly about cash flow, not just the number in the franchisor’s marketing deck.

Kugan Suppiah did some of that homework at 24, spending months persuading his parents to help fund a Bang Cookies franchise in Oklahoma City after graduating from the University of Oklahoma. Now 25, he is already scouting a second location, even though he says baked goods are not necessarily his end goal.

That is the version of the story franchise brands like to tell. The version sitting underneath it, playing out in boardrooms rather than storefronts, is a much larger reallocation of who actually owns American franchising, and it is moving at least as fast as the young buyers chasing their first location.

Frequently Asked Questions

Does a Franchisee Have to Be Told If Private Equity Owns the Brand?

Franchisors must generally hand over a Franchise Disclosure Document at least 14 calendar days before any agreement is signed, but federal and state “sophisticated franchisee exemptions” can reduce required disclosures for buyers deemed financially sophisticated, a category defined by wealth rather than franchise experience.

What Is the Difference Between Buying a New Franchise Unit and an Existing One?

Opening a brand-new location means lenders underwrite projected performance with no operating history to point to, while buying an existing, profitable unit lets a lender evaluate real cash flow, which is one reason acquisitions of existing units have become more common than ground-up development in 2026.

How Much Cash Should a Buyer Keep Beyond the FDD Estimate?

Franchise vetting firm VetMyFranchise found that real-world costs commonly run about 34% higher than the Item 7 estimate in a Franchise Disclosure Document, once build-out overruns, pre-opening labor, personal living expenses and extra working capital are counted.

Can Someone Use Retirement Savings to Buy a Franchise?

Yes, through a Rollover for Business Startups (ROBS) arrangement, which lets a buyer invest 401(k) or IRA funds into a franchise without triggering early withdrawal penalties, though the structure is legally complex enough that specialists recommend working with a dedicated ROBS provider rather than attempting it alone.

Disclaimer: This article is for general informational purposes only and does not constitute financial, legal or investment advice; franchise ownership carries real capital risk, and prospective buyers should consult a franchise attorney and financial advisor and confirm figures against current Franchise Disclosure Documents before committing capital.