February 2nd, 2016
Report: Franchise Businesses Will See Steady Growth Of 1.7 % In 2016 (But Is That Too Optimistic?)
For small business hopefuls thinking of buying into a franchise – or franchise entrepreneurs looking to expand their holdings – there are no glaring reasons not to pull the trigger this year. So says the International Franchise Association’s (IFA) latest report on what to expect from the US franchise space in 2016. The predication: growth across the board.
According to the report, compiled with IHS Economics, the number of franchise establishments in the United States will increase at the same pace it did in 2015—about 1.7%. Employment will increase over 3%. The overall economic output of the franchise industry is expected to jump 5.8% to $944 billion—the fastest pace since before the Great Recession.
Notable hot spots include the food service space: the restaurant franchise sectors – both quick service and full service establishments – are expected each to experience a 6.3% jump in economic output. Business service franchises and lodging sector franchises are also expected to see a boost.
“I don’t think there’s anything too shocking in (the report),” says IFA spokesman Matthew Haller. “It reinforces what a lot of people tend to think about when they think about franchising: the restaurant sector is continuing to grow and strong, and I think the other service-related franchises are also doing very well.”
One reason for steady growth in the business and retail services space in recent years us that many businesses that were never associated with franchising before have decided to give that model a try, says Haller. “Whether its doggy daycare or after-school continuing education for children in art or music or institutional learning, or in the home care and senior care areas—these are sectors that have really grown significantly in the last decade.”
Why are these service businesses turning to franchising? According to Haller, it’s because it offers a way of scaling quickly while relying on motivated small business owners who have skin in the game.
All categories of franchise business analyzed by the IFA are expected to experience at least 1.5% growth in the number of establishments in operation – which is good news – but, to a certain extent, the industry is still coming back from the Great Recession, before which growth jumps of 4% were common. Says Haller: “1% to 2% has been the norm since ‘09.”