Franchise Industry Expected to Grow Faster than Rest of the Economy in 2014

Franchise businesses are expected to grow faster and create more jobs than the rest of the economy again in 2014, according to research released today by the International Franchise Association Educational Foundation. Developed by IHS Global Insight, The Franchise Business Economic Outlook: 2014 revealed that growth in franchise establishments, output and contributions to U.S. gross domestic product will exceed that of 2013.

Key Findings from the Franchise Business Economic Outlook Report:

• Franchises are expected to add nearly 200,000 new jobs in 2014. The pace of employment gains is expected to remain steady compared to 2013, but will continue to outpace total private sector employment growth by 0.3 percent.
• The number of franchise businesses in 2014 is expected to increase by 12,915 in 2014, bringing total establishments to 770,368. The 2014 establishment growth rate is expected to rise to 1.7 percent from 1.4 percent in 2013. This upward momentum will continue to be in-line with the growth of overall business formation across the economy.
• Within the franchising sector, business services, commercial and residential services and quick-service restaurants are expected to be drivers of job creation of 2014. With the fastest growth rate, the business services sector is expected to add 35,109 franchise jobs in 2014, while quick service restaurants, the largest sector in franchising, is expected to create 75,596 new jobs.
• The output of franchise establishment, in terms of dollar revenue, is expected to increase 4.7 percent in 2014 – up from the 4.3 percent recorded in 2013. Despite fiscal pressures placed on many business, especially the largest segment of the franchise sector – restaurants – will continue to grow.

The latest report from the IFA details how franchise businesses are real drivers of GDP in the nation and played a crucial role in the recession.

“Throughout the recession and tepid, uneven economic recovery, the strength of the franchise sector has been a consistent job creator for the U.S. economy,” said IFA President & CEO Steve Caldeira. “While the economic forecast has improved, reform of both the individual and corporate tax codes is long overdue. Given that small businesses create two-thirds of net new jobs, any tax reform must address both corporate and individual rates, so franchise small business owners can invest in building more units and creating more jobs. We applaud and thank Chairman Camp for his leadership on this critically important issue for American businesses.”

Ways and Means Committee Chairman Dave Camp (R-MI) is currently working on proposing new revisions that would overhaul that tax code.

Caldeira went on to say that “Franchises have demonstrated throughout these past several years that we can grow and create jobs, but it’s past time for Washington to do its part and focus on pro-growth policies, including comprehensive tax reform to unlock America’s growth engine.”

All 10 of the franchise business categories measured by the IFA’s outlook report have posted output gains in each of the last three years. Following the recession and the subsequent housing marketing crash, this real estate sector has demonstrated bounding growth with an average annual increase of 5.7 percent. The added value of franchises to national GDP and industry value is assisting to buoy the U.S. economy. The IFA estimates that franchise businesses accounted for about 3.5 percent of the U.S. GDP or $472 billion in 2013. Current estimations show that this figure may increase to as much as 4.5 percent or $493 billion in 2014. Overall, the output by business categories is expanding – enticing more and more entrepreneurial-minded individuals to take their past experiences and skills and put them toward operating a franchise business.