11 Jun 20266 min read
The UK fast-food industry is worth more than £22 billion and remains resilient with consumers valuing speed, convenience and affordability, particularly during periods of economic uncertainty. The sector also has the most established and scalable franchise models. Franchising now contributes £19.1 billion to the UK economy, with more than 1,000 franchise systems operating across over 50,000 units.
Around 50% of consumers eat at fast food or quick service restaurants (QSR) at least once a month, while delivery platforms such as Deliveroo and Uber Eats have helped operators reach customers without increasing their physical footprint. The emergence of cloud kitchens, a delivery only food preparation space, allows operators to keep up with the growing demand for delivery.
Major international brands continue to invest heavily in the UK market. Burger King UK's announcement in April 2026 that it plans to open approximately 30 new restaurants illustrates the confidence that major operators continue to place in the market.
However, while the sector's long-term outlook remains positive, a backdrop of inflationary pressures and changing consumer behaviour means both franchisors and franchisees face a growing number of financial and operational challenges that require careful management.
While revenues remain resilient, profitability is under increasing pressure. Rising energy prices together with food inflation, supply chain volatility and changes to business rates relief from 1 April 2026 are eroding margins. Fast food businesses are inherently labour intensive, and the introduction of higher national living wage rates and increased employer national insurance contributions have added further cost pressures for operators already working within relatively narrow margins. High staff turnover rates, ongoing recruitment demands and increasing wage expectations create additional pressure on management teams.
For franchisees, the structure of the franchise model can make those pressures harder to manage. Royalty fees, typically between 5-8% of gross sales, together with marketing levies, technology and training fees all impact cashflow. Mandatory supplier arrangements can significantly reduce flexibility at a time when cost control is critical. While such arrangements are designed to protect brand consistency, they can limit operators’ ability to source cheaper alternatives or respond quickly to changing conditions.
Many franchisees operate high-volume, low-margin models, and even modest increases in labour, utilities, packaging or supplier costs can materially affect site-level profitability.
The current economic environment presents a mixed picture for consumer demand. On one hand, pressure on household finances can encourage consumers to trade down from premium dining experiences towards lower-cost fast food options. This has historically supported parts of the sector during periods of economic weakness.
However, the same pressures can also reduce overall discretionary spending. Research conducted in February 2026, before escalation of hostilities in the Middle East, indicated that takeaway food and delivery services are among the first areas that consumers would cut back on when managing constrained household budgets. Given the economic environment has weakened considerably since then, this creates a degree of uncertainty for operators.
The rapid growth of delivery platforms has reshaped the sector but has also introduced new challenges. While partnerships with delivery providers allow brands to reach wider audiences, commission fees can reach up to 30% of transaction values. As a result, delivery sales are often materially less profitable than in-store transactions.
Digital platforms have also lowered barriers to market entry and can increase visibility for smaller and emerging brands. That has intensified competition across many local markets, creating risks of market saturation. The resulting pressure on both pricing and customer acquisition creates another challenge for profitability.
For franchisors, maintaining brand relevance requires ongoing investment. Consumer preferences continue to change, with growing demand for healthier menu options, plant-based products, calorie transparency and sustainable packaging. Franchise systems that fail to innovate risk losing market share, but implementing network-wide change requires significant investment and can increase costs for franchisees already operating under pressure.
The UK franchise sector continues to operate largely through self-regulation, with oversight provided mainly through the British Franchise Association's Code of Ethics. Unlike jurisdictions such as the United States, Australia and Canada, the UK does not require formal franchise disclosure documentation by law.
Calls for greater regulation are increasing. Most recently, in February 2026 the government’s Business and Trade Committee published its Small Business Strategy which explicitly recommends that the UK government review the franchising landscape and consider introducing a statutory code of conduct.
Any move toward greater regulation could introduce additional compliance requirements and increase scrutiny of franchise agreements. While this may enhance transparency and protections, it could also add complexity and cost for franchisors.
At the same time, the sector is attracting more private equity investment and seeing the rise of multi-brand franchise operators. These trends are driving professionalisation and faster expansion, but they also introduce more rigorous performance expectations, enhanced reporting requirements, and a sharper focus on financial returns.
The long-term value of a franchise network depends on brand consistency, franchisee profitability and trust across the system. Where franchisees are under pressure, the consequences can spread quickly across the network. Closures damage local market presence, disputes between franchisor and franchisee weaken confidence in the brand, and underinvestment in labour, maintenance or customer experience can directly affect reputation.
The franchise model remains one of the most effective routes to expansion in the hospitality sector, but sustainable growth will require careful management of both financial and operational risks.
Early intervention matters, whether a business is dealing with short-term cash flow pressure, profitability concerns, refinancing, covenant compliance issues or wider financial and operational challenges.
Grant Thornton's Restructuring team works with franchisees, franchisors, lenders and investors across the consumer and hospitality sectors to help businesses navigate periods of uncertainty. We support management teams in assessing financial performance, managing stakeholder relationships, reviewing business models and identifying options for sustainable growth.
For more information, contact Philip Stephenson, Restructuring Partner.
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