Franchise Sector Continues to Lead the Economy Despite Regulatory Concerns

The International Franchise Association (IFA) recently released results from the 3rd Quarter Franchise Forecast for 2013 and Annual Franchise Business Leader Survey (FBLS). The results show that while the franchising sector continues to lead the economy, there are significant regulatory concerns, specifically related to healthcare and tax reform that will impact growth around the corner.

Franchsing“The franchise sector continues to grow adding 184,000 jobs over the past 12 months and is expected to start twice the amount of new businesses than the economy as whole in 2013,” said IFA President & CEO Steve Caldeira. “But with unemployment still high, modest growth is not enough. We need pro-growth reforms on healthcare, taxes and immigration to get this economy roaring again.”

Highlights include:

In the past year and a half, the franchise sector accounted for roughly 10 percent of all new jobs, bringing total jobs in the industry to more than 8 million today. In fact, over the past 12 months, the franchise sector has added 184,000 new jobs in industries such as business and personal services, restaurants, automobile, education and manufacturing. Overall, the franchise sector directly and indirectly supports more than 18 million jobs.
The franchise sector is forecasted to grow faster than the broader economy. Economy-wide business formation and job growth is expected to be 0.7 percent and 1.6 percent respectively, compared to 1.4 percent and 1.9 percent in the franchise sector.
While the franchise sector is outgrowing the broader economy and is expected to increase from the post-recession average in 2013, growth is still expected to remain below pre-recession levels. Job growth from 2001 to 2005 averaged 3.7 percent a year compared to the 1.9 percent forecast for 2013.
Franchisors are more optimistic about the 2014 economy than franchisees. Seventy-six percent of franchisors expect business to be better in 2014 compared to just 31 percent of franchisees.
The top policy concerns for franchisees are increasing government regulations and healthcare costs. At the same time, more than 90 percent of franchisees want government to simplify the tax code with lower individual and corporate tax rates.
Overall, both analyses point to modest growth in the franchise sector for the remainder of the year and into 2014. However, according to franchisees and franchisors, government can take steps to improve the economic landscape by implementing pro-growth policies that will enable job creation and economic growth.