Franchise Failure Rates by Industry: Real FDD Data (2026)

Why Industry-Level Data Matters

Most failure rate discussions treat "franchises" as a monolithic category. They are not. A senior care franchise in suburban Ohio faces entirely different demand dynamics, capital requirements, and competitive pressures than a quick-service food franchise in a highway corridor. Aggregating failure rates across all franchise types produces a number that is accurate for no one.

This page breaks franchise failure rates down by industry, using data from 83 franchises in our database that have calculable failure rates derived from FDD Item 20 disclosures. These are not modeled estimates or survey responses — they are actual unit openings and closures filed with the FTC as part of mandatory annual FDD updates.

Industry Failure Rates: Summary Table

The table below ranks the 8 industries in our database by average annual failure rate, from lowest to highest. "Lowest" and "Highest" refer to the best and worst individual brand within that industry in our database.

Individual Franchise Failure Rates: Full Table

The following table shows every franchise in our database where we have calculated a failure rate. Total units, annual closures, and minimum investment are sourced from the most recent FDD Item 20 disclosures available in our database. Closures per year are approximate annual figures based on the 3-year Item 20 data.

Dashes (—) indicate data points not available in current DB extract for this article. Failure rates and key data points are sourced from our full 83-franchise database. Min investment figures shown where available. Not all 83 franchises are listed here — full data available via the Franchise Matcher.

Lowest Failure Rate Franchises (Top 5 Safest)

The five franchises below share a 0.5% annual closure rate — the lowest in our database of 83 franchises with FDD-derived failure rate data. All five have meaningful minimum investments, reflecting the operational maturity and selectivity that correlates with low closure rates.

The Subway Warning: Unit Count Math Never Lies

Subway is the single most important data point in this entire analysis. With 36,690 total units, it is the largest franchise system in the world by unit count. Yet in the most recent year captured in our database:

That is a net loss of 1,300 units in a single year. For context, Chick-fil-A — a much smaller system — opened 150 units and closed just 10 in the same period, for a net gain of 140 units. These are not cherry-picked numbers; they are the unit economics that FDD Item 20 requires every franchisor to disclose.

Compare Subway's trajectory to Chick-fil-A: 3,059 total units, 150 opened, 10 closed, net +140. The Chick-fil-A system is growing and its closure rate is 0.5%. Any prospective franchisee should look at the net unit change direction — growth systems are qualitatively different from shrinking systems, regardless of the brand's marketing claims.

The Jan-Pro Problem: Low Entry Cost, High Exit Rate

Jan-Pro sits at the opposite end of the investment spectrum from Chick-fil-A. At $4,250 minimum investment, it is among the cheapest franchises in our database. Yet it carries a 7.0% annual failure rate. With approximately 400 closures against 500 openings in the most recent year, Jan-Pro is effectively a high-throughput churn system.

This pattern — very low entry cost, high failure rate — appears in several cleaning and janitorial franchise systems. The low barrier to entry attracts undercapitalized operators who may not have the working capital or management infrastructure to survive the early months. Low royalty revenue per unit also means franchisors have limited incentive to invest heavily in supporting each individual franchisee.

Industry Deep Dives

Food & Restaurant (43 franchises, avg 2.8%)

Food is the largest franchise category by unit count and the most analyzed sector. With 43 franchises tracked in our database and a 2.8% average failure rate, Food & Restaurant sits in the middle of our industry rankings — but that average conceals the widest variance of any sector we cover.

The range runs from Chick-fil-A at 0.5% to Subway at 8.0% — a 16x difference between the best and worst performers in the same industry. Within Food, brand selection is the dominant variable. A well-run quick-service restaurant in a high-traffic location for a growing brand like Raising Cane's has a fundamentally different risk profile than a Subway franchise in a saturated, declining-traffic strip mall.

The food sector's 2.8% average is also sensitive to which brands happen to be in our database. Because we have Subway (the highest failure rate in our entire dataset), the Food average is pulled higher than it might otherwise be. Excluding Subway would pull the Food average below 2.5%.

Fitness & Health (34 franchises, avg 3.1%)

Fitness is the second-largest sector in our database with 34 franchises, and it averages 3.1%. Planet Fitness at 1.0% is the clear anchor of safety in this category — a large, scalable model with a low monthly fee structure that has proven extremely resilient. F45 Training at 7.0% sits at the other extreme, with a higher-intensity boutique model that proved vulnerable to market saturation and post-COVID behavioral shifts.

Fitness franchises generally face higher susceptibility to economic downturns than food or home services. Gym memberships are discretionary; when consumers cut spending, fitness subscriptions are a common early target. Buyers should evaluate the specific brand's performance through the 2020-2021 period as a stress test.

Home Services (29 franchises, avg 3.5%)

Home Services is the second-highest failure rate industry in our database at 3.5%, driven primarily by cleaning and janitorial franchise categories. SERVPRO at 2.0% is the standout low-risk performer in this space — a restoration services brand with near-inelastic demand (water damage and fire damage require remediation regardless of economic conditions). Jan-Pro at 7.0% represents the other end.

The home services category is economically fragmented: some sub-categories (restoration, HVAC, plumbing) serve needs that cannot be deferred, while others (cleaning services, landscaping) face real price competition from independent operators and gig economy alternatives.

Education & Children (15 franchises, avg 3.6%)

Education has the highest average failure rate in our database at 3.6%, but also one of the most extreme ranges: Primrose Schools at 0.5% vs. Code Ninjas at 7.0%. The distinction tracks closely with model type: brick-and-mortar early childhood education (Primrose) has relatively captive demand from parents seeking licensed, accredited care. Technology-based enrichment programs (Code Ninjas) compete against free YouTube tutorials, school STEM programs, and other enrichment options, making their value proposition harder to defend.

Education franchises also face regulatory complexity that varies significantly by state, adding compliance costs that can challenge undercapitalized operators.

Automotive (13 franchises, avg 3.0%)

Automotive averages 3.0% with a narrower range than Food or Education. Christian Brothers Automotive at 0.5% is one of the safest brands in our entire database — a faith-values-based auto repair concept with strong customer loyalty and minimal churn. AAMCO at 5.0% is the category's highest-risk brand, facing long-term headwinds from the shift to EVs (which require less transmission service, AAMCO's traditional specialty).

Senior Care (10 franchises, avg 2.9%)

Senior Care is a small but consistent sector in our database — 10 franchises, ranging from 2.0% (Home Instead) to 4.0% (Always Best Care). Demographic tailwinds are strong: the 65+ population is growing, and in-home care demand has structural support from Medicare/Medicaid reimbursement trends. The category's near-term risk is labor — caregiver wages have increased significantly, and franchise operators who cannot attract and retain caregivers face operational breakdown regardless of client demand.

Retail & Services (20 franchises, avg 2.4%)

Retail & Services has the lowest average failure rate in our database at 2.4%, and the tightest range: 1.5% (Pet Supplies Plus) to 3.5% (FASTSIGNS). This category is also among the most diverse by business model — it includes pet supply retail, business services, and specialty signage. The consistent performance across the category suggests relatively stable demand and operational models. FASTSIGNS at 3.5% is not alarming — it remains well below the database average — and reflects the typical volatility in B2B-oriented service franchises.

Real Estate (9 franchises, avg 2.6%)

Real estate is a small category in our database (9 franchises) and averages 2.6%. RE/MAX at 2.0% reflects the durability of a agent-based real estate brokerage model: the franchisor does not own inventory, so its exposure to market downturns is cushioned. Pillar To Post at 5.0% is a home inspection franchise — a market that moves directly with home transaction volume, making it sensitive to the same interest rate environment that affects real estate broadly.

What "Failure Rate" Actually Means in FDD Data

The failure rate in our database is derived from FDD Item 20, which every franchisor registered in the US must disclose annually. Item 20 contains a table showing, by state, the number of franchise outlets:

• Opened during each of the past 3 fiscal years
• Terminated by the franchisor (contract violation, poor performance)
• Non-renewed (franchisee chose not to renew, or was denied renewal)
• Reacquired by franchisor (buybacks)
• Ceased operations for other reasons
• Transferred to new owner

Our failure rate calculation adds closures, terminations, and non-renewals, then divides by the average system size over the reporting period. Transfers are excluded because they represent ownership changes, not business failures.

How to Use This Data in Your Due Diligence

Failure rate data should be one input among many in franchise due diligence — not the only filter. Here is how to use it effectively:

1. Start with industry-level screening. If you are evaluating multiple industries, the data here gives you a baseline for relative risk by sector. Education and Home Services show higher average risk; Retail & Services and Real Estate show lower average risk.
2. Go brand-specific immediately. Industry averages are almost useless for individual investment decisions. Request the FDD for any brand you are seriously considering and calculate the failure rate yourself from Item 20.
3. Look at the net unit trajectory, not just the closure rate. A 3% closure rate in a growing system (5% openings, 3% closures, net +2%) is very different from a 3% closure rate in a shrinking system (1% openings, 3% closures, net -2%). Net unit direction tells you something about franchisee economics that the raw failure rate does not.
4. Call former franchisees listed in Item 20. FDDs list contact information for franchisees who left the system in the past year. These conversations — asking why they left, whether they would do it again, what they wish they had known — are irreplaceable due diligence.
5. Compare to Item 19. If the franchisor provides a Financial Performance Representation in Item 19, cross-reference those revenue figures against your local market economics. High failure rate + low Item 19 revenues = a combination worth avoiding.

Frequently Asked Questions