Industry Update and Latest Trends in Growth:
The franchise business model is thriving. Virtually every tracked measure of franchise industry economic performance is up. The following are statistics excerpted from research published in the 2022 IFA Franchising Economic Outlook, based on data/analysis furnished by FranData:
- Approximately 775k franchise establishments exist
- 8.5M people are directly employed by franchises
- Nearly $800B is generated by franchises (approx. 3% of GDP)
- The top categories of franchises in operation today:
(1) quick-serve restaurants, (2) business services, (3) full-service restaurants, (4) real estate, and (5) commercial and residential services.
Last year (2022) was the first year we consider to be substantially “post-pandemic.” The reason we say this is that the direct impact (lost revenue) and subsidies (PPP loans) are behind us. Unquestionably, the pandemic spurred lasting economic effects (e.g., “hybrid” work, scarcity of labor, higher wages, higher operating costs, supply chain disruption, inflation, etc.). That said, many industries have fully rebounded and even eclipsed the most recent “normal” year (2019), in terms of total revenue.
What Franchise Industries Are Seeing Growth and Why?
The Home: Consumers are investing in their homes (owned and rented) like never before. The home is, in many cases, the consumer’s office. Spending more time at home has magnified the consumer’s awareness of their home’s condition, needs, and deficiencies. As a result, consumers are spending/investing in their homes – e.g., flooring, window treatments, paint, kitchens, bathrooms, lighting, landscaping, and garages.
Essential Services: Higher demand for essential services has spurred growth in “dirty jobs” such as disaster recovery, drain cleaning, waste collection, junk removal, and roofing. As well, with “technology” enabling workers to be productive from virtually anywhere, our dependence on the tools (laptops, networks, tablets, smartphones) and their secure continuous operation, franchises serving both consumers and businesses are now mainstream.
Health & Wellness: With the full re-opening of the economy, a resurgence in the industries of health, wellness, and beauty has been taking place. From young to old, many consumers are seeking to live healthier, more active lives. This has enabled the boutique fitness space to resume its torrid pace of growth, with the same being said of wellness and personal services (think stress relief, pampering, beauty, mental health, nutrition, etc.)
Home Sellers: Real estate prices and rental rates are higher than ever, in many markets nationwide. This is spurring would-be sellers to make modest reinvestments in their homes due to the scarcity of affordable replacement properties. Accordingly, franchises have emerged to help sellers affect “light/medium” touch improvements quickly, cost-effectively, and with proper design sense.
Youth Education/Enrichment: The pandemic and associated lockdowns had a negative impact on the education of children and young adults. This has boosted demand for an array of youth education, enrichment, care, fitness, and sports development services. Franchises in these spaces experience substantial growth.
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