Conversion Franchise Programs: What 259 FDDs Offer Existing Business Owners

What a conversion franchise is

Summary. A conversion franchise is a franchise sold to someone who already runs a business of the same type, such as an independent repair shop, hotel or brokerage, and who puts that business under the franchisor’s brand instead of opening a new unit. The owner keeps the customers, staff and premises and takes on the brand, system and fees.

How this report counts it. An FDD has a conversion program when it states at least one term that applies only to converting owners: a separate fee, a royalty ramp, a conversion addendum, a separate Item 7 estimate, eligibility rules, or a named conversion track. An FDD accepts conversions when it says existing businesses may convert but sets no different terms. Conversions of a franchisor’s own units, sister-brand swaps and building remodels are excluded.

The federal rule. The FTC Franchise Rule treats some arrangements with experienced operators as a “fractional franchise”: the franchisee has more than 2 years of experience in the same type of business and expects franchise sales to be no more than 20% of total sales in the first year (16 CFR 436.1(g)). Those arrangements are exempt from federal disclosure under 16 CFR 436.8(a)(2). A conversion that puts the whole business under the brand cannot meet the 20% sales test, so that exemption does not apply to it.

How many franchisors offer a conversion franchise program

Summary. 77 of 259 FDDs (29.7%) in the sample set out conversion terms, and 12 more accept conversions without special terms, for 89 (34.4%) in total. Use is concentrated: 16 of 18 lodging FDDs have a conversion track, while restaurants, fitness, beauty, pet and children’s concepts rarely offer one (Minnesota CARDS, FDDs issued 2025 to 2026).

• Lodging: 16 of 18 FDDs (88.9%) offer conversion of an existing hotel; 1 more only acknowledges conversions and 1 is new construction only.
• Automotive: 12 of 17 (70.6%).
• Senior and in-home care: 9 of 18 (50%).
• Retail: 8 of 18 (44.4%); home services: 7 of 18 (38.9%); business services: 5 of 18 (27.8%).
• Food and beverage: 1 of 27 (3.7%); fitness, personal services and pet services: 2 of 18 each (11.1%).

Supplement. The core sample holds one brokerage FDD and no staffing FDD, so 15 more current Minnesota FDDs were coded separately: 7 of 10 real estate brokerage FDDs have a conversion program and 1 more accepts conversions; 0 of 5 staffing FDDs have a program and 1 accepts conversions. These are sector-targeted and are not pooled into the 259-FDD shares. Sector detail for hotels, auto and brokerages is in hotel franchise statistics, automotive franchise statistics and real estate franchise statistics.

Do conversion franchisees pay a lower franchise fee?

Summary. Often, outside hotels. 33 of the 77 programs (42.9%) state a reduced or waived initial fee, rising to 33 of 61 non-hotel programs (54.1%). None of the 16 hotel programs states a conversion fee cut; 11 of 16 (68.8%) charge the same affiliation fee as new construction and 5 say fees have been negotiated, including for hotels leaving other chains.

Size of the cut. Where a conversion fee is stated as an amount or percent (33 FDDs), the median largest discount is 50% of the start-up fee, with an interquartile range of 40.9% to 70.8%. 22 of the 33 offer 50% or more, and 6 let the fee fall to $0. 9 use a tiered schedule where a bigger existing business earns a bigger cut.

• Meineke charges $20,000 under its conversion program against a $45,000 standard fee, a 55.6% cut (Meineke FDD).
• Midas charges $17,500 to owners converting an independent shop against $35,000, a 50% cut (Midas FDD).
• Pet Supplies Plus waives its initial fee for approved conversions if all signage is ordered at signing (Pet Supplies Plus FDD).
• Ace Hardware waives its $5,000 affiliation fee for stores converting from another hardware wholesaler (Ace Hardware FDD).

What the count leaves out. 14 programs (18.2%) say the fee is negotiated case by case; the other 30 that set no special fee charge the standard fee to everyone. Item 5 of an FDD must disclose the range of fees actually paid in the prior year when fees are not uniform (16 CFR 436.5(e)), so that range is the place to check what converting owners really paid. For fee levels across all franchises, see franchise royalty rates.

Royalty ramps and build-out money

Summary. Royalty relief is less common than a fee cut. 19 of 77 programs (24.7%) reduce or waive the royalty for converting owners for a period, all outside lodging. Where the length is stated (13 programs), the median is 24 months, with a range of 2 to 36 months.

• Meineke cuts royalties by 50% for the first 2 years of a converted center (Meineke FDD).
• Steamatic caps royalties for qualifying conversion owners for up to 24 months (Steamatic FDD).
• U.S. Lawns charges no royalty on listed conversion customers for the first 365 days (U.S. Lawns FDD).
• Pearle Vision charges independent conversions a reduced royalty of 2% of gross revenues plus 5% of incremental revenues (Pearle Vision FDD).

Build-out money. 17 programs (22.1%) state franchisor money or financing a converting owner can receive: 9 of 16 hotel programs (56.2%) describe development incentive notes or key money, usually at the franchisor’s discretion and often also open to new builds, and 8 of 61 non-hotel programs do. Examples: a one-time re-branding credit of $5,000 to $25,000 by sales tier (JunkCo+ FDD) and a $50,000 cash incentive if a conversion restaurant opens within 12 months (Hardee’s FDD).

Conditions on converting businesses

Summary. Nearly every program requires the business to already do the same or similar work (76 of 77, 98.7%). Hard numeric gates are less common.

• Minimum revenue: 10 programs (13%), median $200,000 a year, range $100,000 to $500,000.
• Minimum time in business: 8 programs (10.4%), from 12 to 24 months (median 18).
• Deadline to rebrand or open: 22 programs (28.6%), median 90 days, from 45 days to 1,095 days for a dual-branding period.
• Who may convert: 21 programs (27.3%) name independents, 5 (6.5%) name operators under another brand, 6 (7.8%) name both, and 45 (58.4%) do not say.

Examples: Jiffy Lube requires 12 months of continuous operation under another trademark (Jiffy Lube FDD); CPR Cell Phone Repair requires at least $18,000 a month in revenue and a 4.0 Google rating (CPR FDD); Pet Supplies Plus gives 180 days to reopen under the brand (Pet Supplies Plus FDD).

How much cheaper is converting than starting new?

Summary. 36 programs give a separate Item 7 estimate for conversions, which the FTC rule allows as an additional table (16 CFR 436.5(g)). In the 33 FDDs that give both a conversion and a start-up estimate, the median conversion low end is 25.3% of the start-up low end, and the median high end is 58.2% of the start-up high end.

The gap is widest in lodging, where existing buildings replace construction: the median lodging conversion low end is 4.9% of the new-build low end. Comfort Inn estimates $822,951 to $3,335,295 to convert an 80-room hotel against $10,318,405 to $16,302,115 for a newly built hotel, which the FDD sizes slightly larger (Comfort Inn FDD). Service franchises show smaller gaps: the home services median low end is 72.4% of the start-up low end. Item 7 estimates exclude real estate purchase and differ in assumptions; see franchise initial investment for the full Item 7 study.

Conversion share of new units, where anyone discloses it

Summary. Almost no FDD says how many units arrive by conversion: 6 of 259 state any count. Public hotel companies disclose more, and there conversions are a large minority of growth.

• Marriott: roughly 33,400 of 99,459 gross room additions in 2025 were converted from competitor brands, 33.6% (36.8% excluding the 8,789 citizenM acquisition rooms), and over 30% of rooms signed came from conversion opportunities (Marriott 10-K 2025).
• Wyndham: 23% of its pipeline of about 259,000 rooms represented conversion opportunities at December 31, 2025 (Wyndham 10-K 2025).
• Choice Hotels says its unit growth has historically been driven by converting independent and other-chain hotels, without a count (Choice 10-K 2025).
• Fix Auto: at least 63 of the 79 new shops that joined from December 2019 to December 2023 (79.7%) were conversions of existing repair businesses (Fix Auto FDD).
• Hand and Stone: 24 outlets converted to the system in 2023, within a net gain of 40 franchised outlets that year (Hand and Stone FDD).
• Zero results also appear: one home-care franchisor granted 0 conversion franchises in fiscal 2024 (ComForCare FDD) and one swim-school franchisor sold 0 in its conversion formats in 2025 (SafeSplash FDD).

These figures are company-specific and use different bases (rooms added, pipeline, shops joined, net outlet change). They cannot be combined into an industry share.

Do conversion programs follow the supply of independents?

Summary. Partly. Conversion programs are common where there is a large pool of existing operators, but the pool is not only independents. The 2017 Economic Census, the latest with franchise detail (Census EC1700FRAN), counts 93.6% of general automotive repair establishments and 82.3% of real estate offices as not franchise-affiliated; these sectors have high conversion use (70.6% of auto FDDs; 7 of 10 brokerage FDDs in the supplement). Hotels run the other way: only 42.1% of hotel establishments were not franchise-affiliated, yet 16 of 18 hotel FDDs offer conversions, because hotels also switch from one chain to another.

The pool alone does not predict use. Full-service restaurants were 87.5% not franchise-affiliated and temporary help services 93.7%, yet 1 of 27 food FDDs and 0 of 5 staffing FDDs have a conversion program. Plumbing and HVAC contractors were 98.7% not franchise-affiliated, and home services sit in the middle at 38.9%.

Checklist for an owner weighing a conversion franchise

Summary. The FDD answers most of the questions an owner needs before converting. These are the places to look.

1. Item 1 and the exhibits: is there a named conversion addendum or agreement, and does it change the non-compete or let you keep existing accounts?
2. Item 5: is the conversion fee stated, and what range of fees did the franchisor actually collect last year?
3. Item 6: is there a royalty ramp, and does it end on a date or a sales threshold? Do minimum royalties start at once?
4. Item 7: is there a separate conversion estimate, and which costs (signage, software, vehicle wraps, required equipment) still apply?
5. Item 10 and the notes: are incentive notes forgivable only if you stay for the full term?
6. Item 11 and the agreement: how many days do you have to rebrand, and what happens to your old name, phone number and customer data?
7. Item 17: what happens to the business you built if the franchise ends?
8. Item 20: how many conversions opened and closed? Few FDDs say, so ask, and talk to converted owners on the franchisee list.

Our guide to buying a franchise covers the wider process, and franchise costs explains the fees in each Item.