Twice As Much. Twice As Long.

An emerging franchisor stood up during a panel in Minneapolis this week and asked the question most founders are too proud to ask in a room full of peers.

The FDD spells out what the franchisee has to invest. Nobody publishes the other number. So what is it? What should a franchisor actually have in the bank before it starts selling units?

Kris Stuart, co-founder and CEO of Bloomin' Blinds, answered before the moderator could soften it.

"Twice as much as you think. Twice as long."

Then he went past the question. He told the room to get over the pride of holding all their equity, and said the instinct to bootstrap a franchise system, an instinct he had followed himself, had been foolish. Raise when you don't need the money. A raise from strength opens doors. A raise from distress closes them, and you will not know which one you're doing until it's too late to choose.

It's an easy thing to nod at and a hard thing to act on. It's also, right now, the most important thing an emerging franchisor can hear, because the market that used to forgive getting this wrong has changed underneath everyone.

Why 2026 is harder than 2021

For roughly a decade, an undercapitalized franchisor had a fallback. If the system reached enough units, capital would find it. Private equity was actively hunting franchise platforms, valuations were climbing, and a founder who ran thin could reasonably expect the market to bail them out before the runway ended.

That trade is gone.

The private equity panel put distributions at a seven-year low, a level they compared directly to the aftermath of 2009. On stage: Dave Mortenson of Purpose Brands, Brad Stevenson of Neighborly, and Todd Recknagel of Three 20 Group. When distributions dry up, funds stop deploying into new platforms and start pressing the ones they already own.

And the ones they already own were, in a number of cases, bought at prices that made value creation nearly impossible. One panelist cited a business generating roughly $2 million in cash flow that sold for $80 million in 2021. At that entry price, no amount of good operating gets you a return. The only lever left is extraction: raising fees, adding rebates, monetizing the franchisee base. Which is precisely the behavior that shows up two years later as franchisee litigation, an association forming, and a validation problem that kills development.

The distinction the panel kept returning to is worth writing on a wall. Creating value at the unit level is a different business than extracting value from the system. Systems confuse the two when the capital structure forces them to.

Where value actually gets created now

The arbitrage that still works is not at the franchisor level. It's below it.

Buy multi-unit operations at four to five times earnings, install real management, improve unit-level performance, and exit at seven to eight. That spread is real and repeatable, and the panel expects multi-unit consolidation to outpace franchisor M&A for the next several years.

What does not work is buying a franchisor at twelve times and hoping the market hands you eighteen. In this environment it won't.

For a founder, that math has a direct consequence. The buyer pool for your brand has thinned, and the buyers who remain are underwriting unit economics, not unit count. A system with 60 units and mediocre four-wall profitability is now a harder sell than a system with 25 units and defensible margins. Growth without economics used to be a story you could sell. It isn't anymore.

Neighborly's response to this is the most practical thing I heard all week. Rather than let franchisees wander into whatever PE relationship finds them, they built and pre-vetted a list of 25 to 30 firms with a track record in the model, and handed it to their operators. The panel called the resulting three-way relationship a tripod: franchisor, franchisee, and the capital behind them. Take one leg out of alignment and the whole thing goes over.

And on the deal itself, founders typically roll 10 to 20 percent of their equity, which means you are simultaneously the seller and a buyer. Rolled equity can multiply several times over with the right partner. Chasing the last dollar of headline price from the wrong one is how founders end up working for someone who doesn't understand the model. As the panel put it, diligence is the prenup. The goal is a relationship where you never need to open the legal documents again.

The failure math

Craig Leonard, CEO of Boston Lobsta and former COO of McDonald's Japan, supplied the numbers that frame all of this. Roughly half of emerging franchise brands fail, and about half of all U.S. franchise systems never pass 25 units.

Those two figures describe the same wall. Most brands that stall don't stall because the concept was wrong. They stall because the franchisor ran out of money and credibility at the same moment, usually somewhere between unit 10 and unit 30, when the early adopters need real support, the field team doesn't exist yet, and the franchise fees coming in don't remotely cover the cost of delivering what was sold.

Brian Schnell of Faegre Drinker, who moderated that panel, named the compounding error precisely. Emerging brands under capital pressure oversell. They present a "plug and play" system to candidates because that's what closes. And when the franchisee discovers it isn't plug and play, the franchisor hasn't just lost a sale. It has spent trust it will need for every hard conversation that follows. Trust is the only asset an emerging franchisor has more of than its competitors, and it's the one they spend first.

Stuart's alternative is uncomfortable and correct. Tell franchisees you're learning the business of franchising alongside them. Founders assume that admission costs them credibility. In practice it buys the room to be wrong once, which every emerging system needs and most don't budget for.

What separates the systems that make it

If capital is the constraint, unit economics is the thing capital is buying. The profitability panel was the most mechanically useful hour of the conference, and almost none of what they described requires money to implement. Steve White of PuroClean, Charles Keyser of Keyser Enterprises, Rachel Southard of Happinest Brands, and Jackie Secor of Taco John's covered four ideas worth stealing outright.

Map every P&L line to a KPI somebody can act on today. Southard's discipline: the P&L is an outcome, not a management tool. Franchisees can't manage a number that shows up 30 days late. Labor margin in a residential service business isn't managed by looking at labor cost. It's managed by looking at man-hours against capacity, daily.

Benchmark like against like. Keyser's sales bands (roughly $15k, $20k, $25k, and $30k in weekly volume) give each tier its own labor and cost targets. White uses "levels" to time when a unit adds an employee or a truck. Both do the same job. They stop a coach from comparing a fourteen-month-old unit to a mature top performer, which is the fastest way to lose a franchisee's trust in the entire coaching relationship.

Make the data mandatory and standardized. Standardized chart of accounts, mandated financial reporting, a common platform. Without it, "coaching" is opinion.

Publish the spread. Secor's anonymized benchmark reports show operators where they sit against peers without exposing anyone. Competitive people respond to a number they can see.

The results White described at PuroClean: system margins moving from roughly 10 to 12 percent up to 18 to 20 percent, with top operators clearing 30, and multi-unit ownership crossing 40 percent of the system. Multi-unit ownership at that level isn't a growth tactic. It's the scoreboard. Operators only buy a second unit when the first one works.

The gate that ties it back to capital came from Kim Hanson at LearningRx: a 13-week pre-launch program with hard targets a franchisee must hit before opening, including 20 completed assessments and 5 signed students. It solves an inconsistent-launch problem, and it does something else. It slows down the one behavior undercapitalized franchisors can't resist, which is opening units they can't yet support in order to book the fee.

What to do with this

If you are franchising a business in the next 18 months, or you're under 25 units now:

1. 1.Write down your capitalization number, then double it. Do the same to your timeline. If the doubled number is unfundable, you have learned something important before you sold a franchise instead of after.
2. 2.Decide about equity while you still have leverage. The conversation you want to have is the one where you don't need the money.
3. 3.Build the measurement layer before you build the sales layer. Standardized reporting, mapped KPIs, and like-for-like benchmarks cost effort, not capital, and they are what a buyer, a lender, and a good franchisee are all actually underwriting.
4. 4.Gate your openings. Pre-launch requirements with real teeth cost you short-term fee revenue and save you the validation problem that ends brands.
5. 5.Stop selling plug-and-play. Say what the system does and doesn't do yet. You'll close fewer candidates and keep more franchisees.

Tom Baber of RSVP Advertising, on a different panel, reduced the whole subject to a two-part test. Are you growing sustainably, and are your franchisees more profitable this year than last? If both are true, the capital question gets easier every quarter. If either is false, no amount of capital fixes it. It just funds a longer version of the same outcome.

Stuart's line is the one people will quote. But the sentence underneath it is the one that matters. Nobody is coming to rescue a system with thin unit economics. Not in this market. The franchisors who get past 25 units from here will be the ones who capitalized honestly, raised before they were desperate, and built franchisee profitability before they built franchisee count.

Sourced from sessions at the Faegre Drinker franchise conference, Minneapolis, August 18 to 19, 2026. Figures and multiples described here were stated by panelists from the stage and are presented as such. They are not published industry data.

Vertify works with emerging franchisors on development strategy, unit-level economics, and system design. If you're weighing what it will really take to get your system past 25 units, get in touch.