Franchise brands entered 2025 with both momentum and mounting challenges. According to the “2025 Franchise Trends Report” by LT (formerly LaneTerralever), U.S. franchise output is projected to surpass $936 billion. In Arizona alone, we are expected to add approximately1,374 new franchise businesses in 2025, contribute $22.6 billion in economic output, and support 216,000 direct franchise jobs, according to the Franchise Economic Outlook report.

Yet, the LT report warns of a widening gap between consumer expectations and how franchisors allocate marketing dollars. For executives leading franchise systems, particularly in Arizona, the priority is clear: align marketing budgets with shifting consumer behaviors, digital discovery patterns and the unique cultural mix of the local market.

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Arizona’s Growth Opportunity: Urban Saturation Meets Local Nuance

According to franchisor executives from the report, 42% cite urban saturation as their biggest concern, while many see suburban markets as underleveraged. Arizona, therefore, presents a paradox. Phoenix represents a dense, competitive urban market with a median household income of $74,500 a year. Comparatively, this doesn’t rank among the highest U.S. cities, so price sensitivity matters, especially for value-conscious consumers (more on that to come).

For franchisees looking to the Arizona market for growth and/or expansions, this means budgets cannot be evenly spread. National-level brand investment must be paired with highly localized strategies.

What does the research say?

  • Urban markets: Double down on digital advertising, mobile app integration and AI-enhanced discovery to cut through competitive noise.
  • Suburban and rural markets: Prioritize offline tactics—local event sponsorships, partnerships with community organizations and presence at cultural festivals.

Beyond geography, Arizona’s diverse demographics—significant Hispanic communities, retirees, and young digital natives— demand even more nuanced messaging. Behavioral segmentation, not just age or income targeting, will deliver more impact. The report highlights three critical consumer personas: Consistency Crusaders (loyal to reliability), Digital Decision-Makers (tech-driven, discovery via AI/social) and Value Hunters (deal- and convenience-focused).

Where Budgets Are Misaligned

The data reveals that nearly half of franchisors spend $500K+ annually on marketing, yet investments often miss the mark. While consumers increasingly use apps, reviews, maps and short-form video to make decisions, Arizona businesses are heavily invested in their digital presences, though these tend to follow shallow strategies: mobile unoptimized, weak local SEO, and poor conversion focus.

What does all of this mean? There’s plenty of low-hanging fruit for franchises who remain disproportionately weighted toward traditional awareness-building:

  • AI in Discovery: 28% of consumers already use AI to find new products or businesses, but only 39% of franchisors plan to adopt AI tools in the next two years. For Arizona—where younger populations and tech-forward consumers dominate—this is a critical blind spot.
  • Loyalty Programs: 90% of consumers say rewards drive brand stickiness, yet many franchise budgets underfund app-based loyalty features.
  • Digital Convenience: 63% of consumers now rely on apps and maps to locate franchises. For a car-centric state like Arizona, where drive-time dictates choice, investment in mobile-first experience is no longer optional.

Strategic Recommendations for Arizona Franchise Leaders

What should Arizona business leaders do? Meeting consumer expectations doesn’t necessarily require more marketing budget, but perhaps something different. Some potential solutions include:

1. Rebalance Channel Spend

Reallocate budget toward search, social video and mobile apps. The report shows that franchisors still prioritize websites and YouTube, while consumers lean heavily on TikTok, Instagram Reels and AI-powered search. For Arizona, digital ad campaigns localized to Phoenix neighborhoods or Spanish-language social content in Tucson could capture untapped audiences.

2. Invest in Loyalty, Beyond Points

Rewards should not be limited to discounts. In Arizona’s competitive food and beverage sector, loyalty can be tied to cultural relevance; think rewards for attending a local sports sponsorship event or integrating bilingual push notifications in loyalty apps.

3. Use Community as Currency

Arizona consumers prize “local feel with national reliability.” In fact, three out of four say they trust businesses perceived as local, even if they are not. Budgets should support local sponsorships (youth sports, neighborhood cleanups, cultural festivals) while reinforcing national consistency in service and digital convenience.

4. Adopt AI Now, Not Later

AI can optimize media spend, personalize offers and improve operational efficiency—from site selection to customer complaint management. Smaller marketing teams are experimenting more aggressively with AI; Arizona brands that delay will cede ground to more agile competitors.

5. Tailor Urban vs. Rural Messaging

In metro Phoenix, savvy Digital Decision-Makers will expect convenience, seamless mobile ordering and personalization. In smaller Arizona towns, Consistency Crusaders and Value Hunters respond more strongly to affordability, local sponsorships and service trustworthiness. A one-size-fits-all campaign risks alienating both groups.

The Executive Imperative

Franchising success in 2026 will require moving beyond legacy spending patterns and building a marketing ecosystem that reflects how Arizonans live, search and spend. Loyalty programs, AI-driven personalization and community-grounded engagement are not tactical add-ons—they are core to long-term growth.

Arizona’s market growth offers a unique chance for franchise leaders to prove that national scale and local authenticity can coexist. The brands that win will be those that treat budgets not as fixed allocations, but as dynamic investments in consumer trust and loyalty.

Author: Lauren Hillery is VP, Strategy at LT (formerly LaneTerralever). A seasoned creative strategist with over a decade of experience in brand strategy and insight-driven go-to-market planning, Hillery has worked with some of the most recognizable brands, including PetSmart, Massage Envy, the Stratosphere, and Toyota. Her unique ability to bridge brand development with creative, content, and digital strategy has helped these organizations to establish a recognizable and own-able presence in the market.