Predictions show slow growth as the economy recovers from recession
As the American economy recovers, franchised businesses have felt the effects of the struggle - nominal increases in the number of jobs, sluggish economic output, and marginal uptick in the number of establishments opened. With this said, the Franchised Business Economic Outlook, prepared for the International Franchise Association by PricewaterhouseCoopers, predicts key national franchise business trends. And, in this Outlook, predictions for 2010 remain sober.
The report includes trends for ten business lines that rely on the franchising model: quick service restaurants, table/full service restaurants, retail food, lodging, real estate, business services, personal services, automotive, commercial and residential services, and retail products/services. In addition, the forecast addresses top predictions in franchise jobs, economic output, and establishments, in relation to 2009 predictions.
“The predictions from this report are moderate, but they do indicate that we are heading in the right direction, slowly but surely,” said Jania Bailey, president and COO of FranNet. “The franchise industry has been a great contributor to the economy, and we see that continuing in 2010.”
The number of jobs available in franchised businesses is expected to increase by 36,000 jobs, or a gain of 0.4 percent. The total number of jobs decreased in 2009 by 400,000. Two sectors are predicted to experience a decrease in the number of jobs: lodging (-2.4 percent) and commercial/residential services (-0.9 percent). The largest increases are predicted for real estate (1.3 percent), quick service restaurants (0.8 percent), retail food (0.7 percent), and personal services (0.7 percent).
In 2010, the overall economic output of franchise businesses is expected to increase by 2.8 percent to $868.3 billion, up from $844.7 billion in 2009. The greatest increase in output is expected from three areas: personal services (4.4 percent), quick service restaurants (3.2 percent), and business services (2.6 percent).
The number of establishments opened is predicted to increase by 2 percent, to 901,093 in 2010 from 883,292 in 2009. Increases are predicted for four sectors: quick service restaurants (3.1 percent), real estate (3.0 percent), retail food (2.4 percent), and retail products and services (2.3 percent).
IFA President and CEO Matthew Shay says, “We are pleased that the 2010 outlook for franchise businesses is projected to be more positive than 2009, but access to credit remains a major hurdle to increase jobs and economic output at the levels we have seen during past recoveries.” He noted further, “An expected $3.4 billion shortfall in lending to franchise businesses in 2010 will result in 134,000 jobs not created and $13.9 billion in economic output lost.” The IFA urges Congress to pass bills that would close that lending shortfall and allow franchises to operate at full economic potential.
The IFA’s forecast agrees with the results of an IFA Business Leader Survey which reports that franchise business owners are more optimistic about the economy in 2010. Just over half of respondents (51.3 percent) agree the economy will be better in the upcoming year. In 2009, less than one quarter of the survey’s respondents (24.6 percent) agreed that the economy would improve in the upcoming year.
“Franchise owners still have issues of concern. Topping that list is access to capital and financing, as well as franchise/sales development,” Bailey said.
FranNet Consultants help people investigate and explore a variety of franchise business ownership options. They offer direction, information, resources and support to help people find a business model that meets their individual needs. For more information, visit www.frannet.com.
