The Next Chapter: Analyzing Patterns and Factors Defining Franchising in the New Year
Many of the factors impacting the franchise development landscape have changed and yet many remain the same. I have been conducting a monthly franchise sales and marketing trends analysis for almost three years and I have observed some patterns. This article is a summary of my findings and my sentiment on the nine trends poised to impact franchise development efforts in 2024.
1. Joint Employer
The continuation of the joint employer rule changes, both federally and at the state level. The franchise community at large will be navigating the joint employer changes that goes into effect on December 26, 2023. These rule changes will impact franchising and franchise development efforts.
2. A Continued Rebalancing of In-Person Events and Online Events
In the post-Covid world, the demand for in-person events will continue to rise. Taylor Swift’s 2023 record-breaking tour is a clear indication of the demand to get back together. More franchisors will be going back to in-person discovery days and, at the very list, a hybrid discovery day model combining virtual and in-person. More franchisors will also relaunch annual franchisee conferences.
3. Hiring will Continue to be Difficult
The unemployment rate is low, and it will continue to be a challenge for franchisees to find and retain staff. Franchisee candidates will likely have hiring on their minds and franchisors will need to be prepared on how to help advise. With the new joint employer rule in force in 2024, it will make supporting franchisees more difficult.
4. The Continued Incorporation of Artificial Intelligence
The use of artificial intelligence will continue in 2024. However, in 2024 the use will become more serious. For most in 2023, the use of AI has been a bit of a novelty. However, it is my opinion that franchisors and franchise development professionals will incorporate the use of AI beyond early adopters to incorporate use into franchise sales and franchise marketing efforts.
5. Private Equity will Continue to Invest in Franchising
Private equity has a record $2.59 trillion of capital sitting on the sidelines. The importance is that private equity has a lot of cash ready to be deployed and that franchisors are an ideal acquisition target. Private equity investments in franchising will continue into 2024 and franchisors should consider if this type of partnership is right for their franchise system.
6. Lending Rates are Up and will Stay Flat
Franchise development professionals will continue to sort through the small business lending challenges. Current rates for small business loans from banks range between 5.75% and 11.91%. The cost to borrow money has increased in two ways. First, everyone’s dollar can buy less due to inflation and due to rising interest rates it costs more to borrow the money too. With inflation appearing to subdue, it is likely the interest rates stay flat in 2024.
7. Inflation will Continue to Impact Prices and Consumer Behavior
The inflation rate has slowed and appears to have leveled off between three percent and four percent since June of 2023. However, the impact from the high rate of inflation is going to continue to impact prices and consumer behavior. Franchise development professionals must understand how the investment listed in their Item 7 and that franchise candidates likely have a fear of how to create a profitable franchise in this economic climate.
8. Mixed Macro-Economic Data
The economic data reports will continue to be mixed, indicating an economy that is relatively flat. The manufacturing sector has been on a downswing half of 2022 and all of 2023 and the service economy has been just above breakeven. Reports like these will continue to show mixed economic data, generally indicating an economy that is hovering just above or just below economic growth.
9. New Business Start-Ups
More than 5 million new businesses started in 2022 and will start in 2023, and the number accelerated in the last half of 2023. Comparatively, to pre-Covid, there were approximately 3.5 million new business start-ups in 2019. The importance of this data is two-fold. First, it shows that the number of new businesses has increased significantly and that some of these start-up entrepreneurs will end up purchasing a franchise. The second important element is that it shows that entrepreneurship is on the minds of the American populace.
2024 Franchise Development Trends
The trends in this article will impact franchise development efforts in 2024. So, the question becomes what will you do about it? The wise franchisor will review these factors, as well as others, that will be impacting their franchise efforts and create a plan. They will be a step ahead of their competitors. The foolish franchisor will continue to do things the way they have always been done and wonder why their franchise development efforts are not working.
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