IFA: 2023 Franchise Growth Topped Projections

IFA: 2023 Franchise Growth Topped Projections

2 Reports Show Franchising Performing Well Amid Unsteady Economy 

The International Franchise Association on Wednesday unveiled its 2024 Franchising Economic Outlook report, which indicated that franchise growth was better than expected last year. Data showed a 2.2% growth in 2023, with a forecast of 1.9% growth in 2024. Also on Wednesday, the IFA shared results from its 2024 Franchisor Survey, which revealed opinions about the labor market, price increases and policies.

“These reports demonstrate the resilience of the franchise business model,” IFA President and CEO Matthew Haller stated in a news release. “Even in the face of macroeconomic factors like high inflation, labor availability and the cost of capital, franchised businesses continue to outpace the growth of the broader economy.”

Darrell Johnson, CEO of FRANdata, the research and analytical company that repaired the reports, agreed with Haller, saying, “Even amid rising interest rates, franchising grew ahead of our projections. With continuing inflation and labor challenges, a U.S. presidential election, geopolitical tensions and technological advances in artificial intelligence, 2024 should be a transition year for the U.S. economy, but franchising continues to stand out.”

Highlights of Franchising Economic Outlook

Major points in the 2024 Franchising Economic Outlook are: 

  • Franchises will grow by 15,000-plus units, or 1.9%, to 821,000 units this year. Franchising grew about 2.2% last year, eclipsing FRANdata’s expected 1.9%. Franchising had a 1.8% growth rate in 2021-2022.
  • Franchising will add some 221,000 jobs in the United States this year. If that forecast proves true, there will be about 8.9 million franchise employees in the country. 
  • Total franchise output will rise 4.1%, from $858.5 billion last year to $893.9 billion this year. 
  • Growth in the Southeast and Southwest will outpace other regions. The 10 states expected to post the most growth are Texas, Florida, Georgia, North Carolina, South Carolina, Tennessee, Maryland, Arizona, Colorado, and Virginia. California (at minus 4.2%) and Washington (minus 2.3%) are expected to lag the other states.
  • Franchising’s personal services and quick-service restaurant sectors will experience the strongest growth. 

Highlights of Franchisor Survey

Following are key takeaways from the 2024 Franchisor Survey.

  • The labor shortage continues, with 80% of respondents saying their franchises have unfilled jobs.
  • Fears of Inflation dropped to third place among concerns, with only 9% of the respondents saying inflation is their top concern. Last year, 20% of respondents said it was their primary concern. 
  • For 34% of businesses, the cost and quality of labor ranked as the No. 1 business challenge. Again, the report reflects a brighter outlook in that regard: The percentage declined from 47% in 2023.
  • More than four-fifths in the survey (81%) had raised wages for employees during the last six months; 61% plan to increase wages in the next six months.
  • Rising prices, including higher wages, have reduced margins. 
  • Two of the anticipated business challenges in 2024 are interest rates on loans and reduced consumer demand. 
  • Nearly three-fourths of responding franchisors (74%) stated they have a high level of concern that their relationship with their franchisees will be altered because of the Biden administration’s new joint employer standard.
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