Unpacking Scope 3: Category 14 – Franchises
GHG Scope 3 Downstream activites | Category 14 – Franchises
Capturing emissions across branded operations
Franchise business models allow companies to expand rapidly without directly operating every location. While this structure provides commercial flexibility, it also creates a unique carbon accounting challenge. Even if franchise outlets are independently owned and operated, they still operate under your brand. Their emissions fall exactly under this Scope 3 category.
Category 14 includes greenhouse gas (GHG) emissions from franchise operations that are not included in the reporting company’s Scope 1 or Scope 2 inventory. It applies specifically to franchisors i.e. the brand owner that grants licenses to third parties.
This category is particularly relevant for global restaurant chains, hospitality groups, retail networks, fitness brands, automotive service chains and other franchise-based business models.
What does this mean in practice?
If your company operates a global fast-food brand where most outlets are independently owned, the electricity, gas, and fuel used at those restaurants may fall under Category 14.
If your brand licenses hotels or retail stores in multiple countries, emissions from those facilities may need to be reported here.
If franchisees operate warehouses, distribution centers, or service fleets under your brand, those operational emissions are also relevant.
In short, Category 14 applies when your brand is present, but operational control is not.
Why Category 14 matters
For many franchise-driven businesses, the majority of physical locations are operated by franchisees. As a result, emissions from franchised outlets can significantly exceed emissions from corporate-owned facilities.
Stakeholders increasingly view brand owners as responsible for the environmental performance of their entire network and supply chain. Investors, regulators and customers expect transparency and climate leadership across all branded operations across the whole group’s supply value, not just directly controlled sites.
Ignoring Category 14 can therefore create reputational and reporting gaps.
How companies estimate these emissions
Estimating Category 14 emissions can be challenging due to limited direct control over franchise operations. Companies typically:
- Collect energy and fuel data directly from franchisees
- Use standardised reporting templates across the network
- Apply average energy consumption per outlet when data is incomplete
- Use industry benchmarks or regional emission factors
Over time, companies often improve data quality by introducing centralised sustainability reporting systems or digital data collection platforms.
Governance and influence
Although franchisors may not control day-to-day operations, they can influence environmental performance through:
- Franchise agreements that include sustainability clauses
- Operational guidelines on energy efficiency and waste management
- Approved supplier standards
- Training programs and sustainability toolkits
- Incentives for renewable energy adoption
By embedding environmental expectations into franchise frameworks, brands can drive consistent emissions reductions across their networks.
The strategic perspective
Category 14 highlights the power of influence over ownership. Climate accountability increasingly follows brand identity and market presence.
Strong governance, standardised reporting and collaborative engagement with franchise partners can transform a decentralised network into a coordinated sustainability ecosystem.
In franchise models, environmental responsibility does not stop at corporate headquarters. It extends across every location that carries the brand name.
